Correlation Between Altria and Universal
Can any of the company-specific risk be diversified away by investing in both Altria and Universal 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 Universal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altria Group and Universal, you can compare the effects of market volatilities on Altria and Universal 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 Universal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altria and Universal.
Diversification Opportunities for Altria and Universal
Poor diversification
The 3 months correlation between Altria and Universal is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal 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 Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Altria i.e., Altria and Universal go up and down completely randomly.
Pair Corralation between Altria and Universal
Allowing for the 90-day total investment horizon Altria is expected to generate 1.2 times less return on investment than Universal. In addition to that, Altria is 1.27 times more volatile than Universal. It trades about 0.33 of its total potential returns per unit of risk. Universal is currently generating about 0.5 per unit of volatility. If you would invest 5,005 in Universal on August 27, 2024 and sell it today you would earn a total of 794.00 from holding Universal or generate 15.86% 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. Universal
Performance |
| Timeline |
| Altria Group |
| Universal |
Altria and Universal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Altria and Universal
The main advantage of trading using opposite Altria and Universal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altria position performs unexpectedly, Universal 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 Universal will offset losses from the drop in Universal's long position.| Altria vs. British American Tobacco | Altria vs. Universal | Altria vs. Imperial Brands PLC | Altria vs. Philip Morris International |
| Universal vs. Imperial Brands PLC | Universal vs. Japan Tobacco ADR | Universal vs. Philip Morris International | Universal vs. Turning Point Brands |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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