Correlation Between Philip Morris and Weyco

Can any of the company-specific risk be diversified away by investing in both Philip Morris and Weyco at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Philip Morris and Weyco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Philip Morris International and Weyco Group, you can compare the effects of market volatilities on Philip Morris and Weyco and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Philip Morris with a short position of Weyco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Weyco.

Diversification Opportunities for Philip Morris and Weyco

0.3

Correlation Coefficient

Philip Morris  Weyco

Weak diversification

The 3 months correlation between Philip and Weyco is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Weyco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyco Group and Philip Morris is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Philip Morris International are associated (or correlated) with Weyco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyco Group has no effect on the direction of Philip Morris i.e., Philip Morris and Weyco go up and down completely randomly.

Pair Corralation between Philip Morris and Weyco

Allowing for the 90-day total investment horizon Philip Morris is expected to generate 2.26 times less return on investment than Weyco. But when comparing it to its historical volatility, Philip Morris International is 1.9 times less risky than Weyco. It trades about 0.06 of its potential returns per unit of risk. Weyco Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,050  in Weyco Group on September 25, 2024 and sell it today you would earn a total of  1,753  from holding Weyco Group or generate 85.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Philip Morris International  vs.  Weyco Group

Philip Morris Intern

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Philip Morris is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Weyco Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Weyco Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Weyco unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Philip Morris and Weyco

The main advantage of trading using opposite Philip Morris and Weyco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, Weyco can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Weyco will offset losses from the drop in Weyco's long position.

The idea behind Philip Morris International and Weyco Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.