Correlation Between Seven West and Philip Morris

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

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

Diversification Opportunities for Seven West and Philip Morris

-0.74

Correlation Coefficient

Seven West  Philip Morris

Pay attention - limited upside

The 3 months correlation between Seven and Philip is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Seven West Media 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 Seven West 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 Seven West Media 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 Seven West i.e., Seven West and Philip Morris go up and down completely randomly.

Pair Corralation between Seven West and Philip Morris

Assuming the 90 days horizon Seven West Media is expected to under-perform the Philip Morris. In addition to that, Seven West is 1.71 times more volatile than Philip Morris International. It trades about -0.05 of its total potential returns per unit of risk. Philip Morris International is currently generating about 0.1 per unit of volatility. If you would invest  11,232  in Philip Morris International on September 5, 2024 and sell it today you would earn a total of  1,162  from holding Philip Morris International or generate 10.35% return on investment over 90 days.

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

Seven West Media  vs.  Philip Morris International

Seven West Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seven West Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Philip Morris Intern

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Philip Morris may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Seven West and Philip Morris

The main advantage of trading using opposite Seven West and Philip Morris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seven West 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 Seven West Media 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.