Correlation Between Altria and Fresh Del

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Can any of the company-specific risk be diversified away by investing in both Altria and Fresh Del 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 Altria and Fresh Del into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altria Group and Fresh Del Monte, you can compare the effects of market volatilities on Altria and Fresh Del 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 Altria with a short position of Fresh Del. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altria and Fresh Del.

Diversification Opportunities for Altria and Fresh Del

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Altria and Fresh is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and Fresh Del Monte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresh Del Monte and Altria 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 Altria Group are associated (or correlated) with Fresh Del. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresh Del Monte has no effect on the direction of Altria i.e., Altria and Fresh Del go up and down completely randomly.

Pair Corralation between Altria and Fresh Del

Allowing for the 90-day total investment horizon Altria is expected to generate 2.56 times less return on investment than Fresh Del. But when comparing it to its historical volatility, Altria Group is 1.26 times less risky than Fresh Del. It trades about 0.02 of its potential returns per unit of risk. Fresh Del Monte is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,943  in Fresh Del Monte on November 2, 2024 and sell it today you would earn a total of  165.00  from holding Fresh Del Monte or generate 5.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Altria Group  vs.  Fresh Del Monte

 Performance 
       Timeline  
Altria Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Altria Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Altria is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Fresh Del Monte 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fresh Del Monte has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Fresh Del is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Altria and Fresh Del Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Altria and Fresh Del

The main advantage of trading using opposite Altria and Fresh Del positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altria position performs unexpectedly, Fresh Del 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 Fresh Del will offset losses from the drop in Fresh Del's long position.
The idea behind Altria Group and Fresh Del Monte 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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