Correlation Between Philip Morris and BG Foods
Can any of the company-specific risk be diversified away by investing in both Philip Morris and BG Foods 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 BG Foods 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 BG Foods, you can compare the effects of market volatilities on Philip Morris and BG Foods 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 BG Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and BG Foods.
Diversification Opportunities for Philip Morris and BG Foods
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Philip and BGS is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods 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 BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of Philip Morris i.e., Philip Morris and BG Foods go up and down completely randomly.
Pair Corralation between Philip Morris and BG Foods
Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 0.39 times more return on investment than BG Foods. However, Philip Morris International is 2.55 times less risky than BG Foods. It trades about 0.17 of its potential returns per unit of risk. BG Foods is currently generating about -0.06 per unit of risk. If you would invest 8,662 in Philip Morris International on August 27, 2024 and sell it today you would earn a total of 4,337 from holding Philip Morris International or generate 50.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Philip Morris International vs. BG Foods
Performance |
| Timeline |
| Philip Morris Intern |
| BG Foods |
Philip Morris and BG Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philip Morris and BG Foods
The main advantage of trading using opposite Philip Morris and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, BG Foods 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 BG Foods will offset losses from the drop in BG Foods' long position.| Philip Morris vs. British American Tobacco | Philip Morris vs. Universal | Philip Morris vs. Imperial Brands PLC | Philip Morris vs. Altria Group |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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