Correlation Between Philip Morris and British Amer
Can any of the company-specific risk be diversified away by investing in both Philip Morris and British Amer 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 British Amer 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 British American Tobacco, you can compare the effects of market volatilities on Philip Morris and British Amer 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 British Amer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and British Amer.
Diversification Opportunities for Philip Morris and British Amer
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Philip and British is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British Amer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Philip Morris i.e., Philip Morris and British Amer go up and down completely randomly.
Pair Corralation between Philip Morris and British Amer
Allowing for the 90-day total investment horizon Philip Morris is expected to generate 15.17 times less return on investment than British Amer. In addition to that, Philip Morris is 1.98 times more volatile than British American Tobacco. It trades about 0.01 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.38 per unit of volatility. If you would invest 3,491 in British American Tobacco on August 28, 2024 and sell it today you would earn a total of 242.00 from holding British American Tobacco or generate 6.93% 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. British American Tobacco
Performance |
| Timeline |
| Philip Morris Intern |
| British American Tobacco |
Philip Morris and British Amer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philip Morris and British Amer
The main advantage of trading using opposite Philip Morris and British Amer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, British Amer 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 British Amer will offset losses from the drop in British Amer's long position.| Philip Morris vs. British American Tobacco | Philip Morris vs. Universal | Philip Morris vs. Imperial Brands PLC | Philip Morris vs. Altria Group |
| British Amer vs. Philip Morris International | British Amer vs. Universal | British Amer vs. Imperial Brands PLC | British Amer 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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