Correlation Between Microsoft and Philip Morris
Can any of the company-specific risk be diversified away by investing in both Microsoft and Philip Morris 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 Microsoft and Philip Morris into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Philip Morris International, you can compare the effects of market volatilities on Microsoft and Philip Morris 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 Microsoft with a short position of Philip Morris. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Philip Morris.
Diversification Opportunities for Microsoft and Philip Morris
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Philip is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Philip Morris International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris Intern and Microsoft 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 Microsoft are associated (or correlated) with Philip Morris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philip Morris Intern has no effect on the direction of Microsoft i.e., Microsoft and Philip Morris go up and down completely randomly.
Pair Corralation between Microsoft and Philip Morris
Given the investment horizon of 90 days Microsoft is expected to under-perform the Philip Morris. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.03 times less risky than Philip Morris. The stock trades about -0.06 of its potential returns per unit of risk. The Philip Morris International is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 13,141 in Philip Morris International on August 24, 2024 and sell it today you would lose (20.00) from holding Philip Morris International or give up 0.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Philip Morris International
Performance |
| Timeline |
| Microsoft |
| Philip Morris Intern |
Microsoft and Philip Morris Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Philip Morris
The main advantage of trading using opposite Microsoft and Philip Morris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Philip Morris 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 Philip Morris will offset losses from the drop in Philip Morris' long position.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |