Correlation Between Altria and PVH Corp
Can any of the company-specific risk be diversified away by investing in both Altria and PVH Corp 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 PVH Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altria Group and PVH Corp, you can compare the effects of market volatilities on Altria and PVH Corp 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 PVH Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altria and PVH Corp.
Diversification Opportunities for Altria and PVH Corp
Poor diversification
The 3 months correlation between Altria and PVH is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and PVH Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVH Corp 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 PVH Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVH Corp has no effect on the direction of Altria i.e., Altria and PVH Corp go up and down completely randomly.
Pair Corralation between Altria and PVH Corp
Allowing for the 90-day total investment horizon Altria is expected to generate 1.57 times less return on investment than PVH Corp. But when comparing it to its historical volatility, Altria Group is 2.28 times less risky than PVH Corp. It trades about 0.07 of its potential returns per unit of risk. PVH Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7,036 in PVH Corp on September 5, 2024 and sell it today you would earn a total of 4,123 from holding PVH Corp or generate 58.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Altria Group vs. PVH Corp
Performance |
| Timeline |
| Altria Group |
| PVH Corp |
Altria and PVH Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Altria and PVH Corp
The main advantage of trading using opposite Altria and PVH Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altria position performs unexpectedly, PVH Corp 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 PVH Corp will offset losses from the drop in PVH Corp's long position.| Altria vs. British American Tobacco | Altria vs. Universal | Altria vs. Imperial Brands PLC | Altria vs. Philip Morris International |
| PVH Corp vs. VF Corporation | PVH Corp vs. Levi Strauss Co | PVH Corp vs. Under Armour A | PVH Corp vs. Columbia Sportswear |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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