Correlation Between Vita Coco and Altria
Can any of the company-specific risk be diversified away by investing in both Vita Coco and Altria 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 Vita Coco and Altria into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vita Coco and Altria Group, you can compare the effects of market volatilities on Vita Coco and Altria 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 Vita Coco with a short position of Altria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vita Coco and Altria.
Diversification Opportunities for Vita Coco and Altria
Poor diversification
The 3 months correlation between Vita and Altria is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vita Coco and Altria Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria Group and Vita Coco 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 Vita Coco are associated (or correlated) with Altria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altria Group has no effect on the direction of Vita Coco i.e., Vita Coco and Altria go up and down completely randomly.
Pair Corralation between Vita Coco and Altria
Given the investment horizon of 90 days Vita Coco is expected to generate 1.8 times more return on investment than Altria. However, Vita Coco is 1.8 times more volatile than Altria Group. It trades about 0.14 of its potential returns per unit of risk. Altria Group is currently generating about -0.02 per unit of risk. If you would invest 3,514 in Vita Coco on November 3, 2024 and sell it today you would earn a total of 230.00 from holding Vita Coco or generate 6.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vita Coco vs. Altria Group
Performance |
| Timeline |
| Vita Coco |
| Altria Group |
Vita Coco and Altria Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vita Coco and Altria
The main advantage of trading using opposite Vita Coco and Altria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vita Coco position performs unexpectedly, Altria 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 Altria will offset losses from the drop in Altria's long position.| Vita Coco vs. Coca Cola Femsa SAB | Vita Coco vs. Coca Cola European Partners | Vita Coco vs. Embotelladora Andina SA | Vita Coco vs. Monster Beverage Corp |
| Altria vs. British American Tobacco | Altria vs. Universal | Altria vs. Imperial Brands PLC | Altria vs. Philip Morris International |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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