Correlation Between 76720AAG1 and Philip Morris

Can any of the company-specific risk be diversified away by investing in both 76720AAG1 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 76720AAG1 and Philip Morris into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between RIO TINTO FIN and Philip Morris International, you can compare the effects of market volatilities on 76720AAG1 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 76720AAG1 with a short position of Philip Morris. Check out your portfolio center. Please also check ongoing floating volatility patterns of 76720AAG1 and Philip Morris.

Diversification Opportunities for 76720AAG1 and Philip Morris

0.06

Correlation Coefficient

76720AAG1  Philip Morris

Significant diversification

The 3 months correlation between 76720AAG1 and Philip is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding RIO TINTO FIN 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 76720AAG1 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 RIO TINTO FIN 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 76720AAG1 i.e., 76720AAG1 and Philip Morris go up and down completely randomly.

Pair Corralation between 76720AAG1 and Philip Morris

Assuming the 90 days trading horizon 76720AAG1 is expected to generate 5.16 times less return on investment than Philip Morris. But when comparing it to its historical volatility, RIO TINTO FIN is 3.16 times less risky than Philip Morris. It trades about 0.22 of its potential returns per unit of risk. Philip Morris International is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  13,020  in Philip Morris International on December 2, 2024 and sell it today you would earn a total of  2,508  from holding Philip Morris International or generate 19.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

RIO TINTO FIN  vs.  Philip Morris International

RIO TINTO FIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days RIO TINTO FIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 76720AAG1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Philip Morris Intern

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Philip Morris displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 76720AAG1 and Philip Morris

The main advantage of trading using opposite 76720AAG1 and Philip Morris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 76720AAG1 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 RIO TINTO FIN 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.