Correlation Between US FOODS and Philip Morris

Can any of the company-specific risk be diversified away by investing in both US FOODS and Philip Morris 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 US FOODS and Philip Morris into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US FOODS HOLDING and Philip Morris International, you can compare the effects of market volatilities on US FOODS and Philip Morris 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 US FOODS with a short position of Philip Morris. Check out your portfolio center. Please also check ongoing floating volatility patterns of US FOODS and Philip Morris.

Diversification Opportunities for US FOODS and Philip Morris

0.37

Correlation Coefficient

US FOODS  Philip Morris

Weak diversification

The 3 months correlation between UFH and Philip is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding US FOODS HOLDING and Philip Morris International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris Intern and US FOODS 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 US FOODS HOLDING are associated (or correlated) with Philip Morris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philip Morris Intern has no effect on the direction of US FOODS i.e., US FOODS and Philip Morris go up and down completely randomly.

Pair Corralation between US FOODS and Philip Morris

Assuming the 90 days trading horizon US FOODS HOLDING is expected to generate 1.2 times more return on investment than Philip Morris. However, US FOODS is 1.2 times more volatile than Philip Morris International. It trades about 0.18 of its potential returns per unit of risk. Philip Morris International is currently generating about -0.02 per unit of risk. If you would invest  5,650  in US FOODS HOLDING on October 23, 2024 and sell it today you would earn a total of  950.00  from holding US FOODS HOLDING or generate 16.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

US FOODS HOLDING  vs.  Philip Morris International

US FOODS HOLDING

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US FOODS HOLDING are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, US FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Philip Morris Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Philip Morris International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Philip Morris is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with US FOODS and Philip Morris

The main advantage of trading using opposite US FOODS and Philip Morris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US FOODS position performs unexpectedly, Philip Morris 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 Philip Morris will offset losses from the drop in Philip Morris' long position.

The idea behind US FOODS HOLDING and Philip Morris International 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.