Correlation Between Basic Materials and Altria
Can any of the company-specific risk be diversified away by investing in both Basic Materials 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 Basic Materials and Altria into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Altria Group, you can compare the effects of market volatilities on Basic Materials 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 Basic Materials with a short position of Altria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Altria.
Diversification Opportunities for Basic Materials and Altria
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Basic and Altria is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Altria Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria Group and Basic Materials 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 Basic Materials 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 Basic Materials i.e., Basic Materials and Altria go up and down completely randomly.
Pair Corralation between Basic Materials and Altria
Assuming the 90 days trading horizon Basic Materials is expected to under-perform the Altria. But the index apears to be less risky and, when comparing its historical volatility, Basic Materials is 1.8 times less risky than Altria. The index trades about -0.08 of its potential returns per unit of risk. The Altria Group is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 30,650 in Altria Group on November 6, 2024 and sell it today you would earn a total of 50.00 from holding Altria Group or generate 0.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.31% |
| Values | Daily Returns |
Basic Materials vs. Altria Group
Performance |
| Timeline |
Basic Materials and Altria Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Altria Group
Pair trading matchups for Altria
Pair Trading with Basic Materials and Altria
The main advantage of trading using opposite Basic Materials and Altria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials 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.| Basic Materials vs. STMicroelectronics NV | Basic Materials vs. Verizon Communications | Basic Materials vs. Molson Coors Beverage | Basic Materials vs. Unifique Telecomunicaes SA |
| Altria vs. British American Tobacco | Altria vs. Karsten SA | Altria vs. Ameriprise Financial | Altria vs. LPL Financial Holdings |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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