Correlation Between Philip Morris and African Agriculture
Can any of the company-specific risk be diversified away by investing in both Philip Morris and African Agriculture 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 Philip Morris and African Agriculture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Philip Morris International and African Agriculture Holdings, you can compare the effects of market volatilities on Philip Morris and African Agriculture 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 Philip Morris with a short position of African Agriculture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and African Agriculture.
Diversification Opportunities for Philip Morris and African Agriculture
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Philip and African is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and African Agriculture Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Agriculture and Philip Morris 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 Philip Morris International are associated (or correlated) with African Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Agriculture has no effect on the direction of Philip Morris i.e., Philip Morris and African Agriculture go up and down completely randomly.
Pair Corralation between Philip Morris and African Agriculture
If you would invest 13,211 in Philip Morris International on August 31, 2024 and sell it today you would lose (29.00) from holding Philip Morris International or give up 0.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 4.55% |
| Values | Daily Returns |
Philip Morris International vs. African Agriculture Holdings
Performance |
| Timeline |
| Philip Morris Intern |
| African Agriculture |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Philip Morris and African Agriculture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philip Morris and African Agriculture
The main advantage of trading using opposite Philip Morris and African Agriculture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, African Agriculture 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 African Agriculture will offset losses from the drop in African Agriculture's long position.| Philip Morris vs. British American Tobacco | Philip Morris vs. Universal | Philip Morris vs. Imperial Brands PLC | Philip Morris vs. Altria Group |
| African Agriculture vs. Eastern Co | African Agriculture vs. Cebu Air ADR | African Agriculture vs. Hf Foods Group | African Agriculture vs. Porvair plc |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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