Correlation Between Volkswagen and Philip Morris

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

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

Diversification Opportunities for Volkswagen and Philip Morris

0.0

Correlation Coefficient

Volkswagen  Philip Morris

Pay attention - limited upside

The 3 months correlation between Volkswagen and Philip is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and Philip Morris CR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris CR and Volkswagen 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 Volkswagen AG 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 CR has no effect on the direction of Volkswagen i.e., Volkswagen and Philip Morris go up and down completely randomly.

Pair Corralation between Volkswagen and Philip Morris

If you would invest  1,624,000  in Philip Morris CR on November 28, 2024 and sell it today you would earn a total of  98,000  from holding Philip Morris CR or generate 6.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.69%
Values	Daily Returns

Volkswagen AG  vs.  Philip Morris CR

Volkswagen AG

Risk-Adjusted Performance

Good

Over the last 90 days Volkswagen AG has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Volkswagen is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Philip Morris CR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris CR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Philip Morris may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Volkswagen and Philip Morris

The main advantage of trading using opposite Volkswagen and Philip Morris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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 Volkswagen AG and Philip Morris CR 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.