Correlation Between Philip Morris and Kansai Electric

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Can any of the company-specific risk be diversified away by investing in both Philip Morris and Kansai Electric 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 Kansai Electric 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 The Kansai Electric, you can compare the effects of market volatilities on Philip Morris and Kansai Electric 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 Kansai Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Kansai Electric.

Diversification Opportunities for Philip Morris and Kansai Electric

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Philip and Kansai is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and The Kansai Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kansai Electric 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 Kansai Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kansai Electric has no effect on the direction of Philip Morris i.e., Philip Morris and Kansai Electric go up and down completely randomly.

Pair Corralation between Philip Morris and Kansai Electric

Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 0.6 times more return on investment than Kansai Electric. However, Philip Morris International is 1.66 times less risky than Kansai Electric. It trades about 0.13 of its potential returns per unit of risk. The Kansai Electric is currently generating about 0.06 per unit of risk. If you would invest  8,831  in Philip Morris International on September 4, 2024 and sell it today you would earn a total of  4,138  from holding Philip Morris International or generate 46.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy46.15%
ValuesDaily Returns

Philip Morris International  vs.  The Kansai Electric

 Performance 
       Timeline  
Philip Morris Intern 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Philip Morris is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Kansai Electric 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days The Kansai Electric has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Kansai Electric is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Philip Morris and Kansai Electric Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Philip Morris and Kansai Electric

The main advantage of trading using opposite Philip Morris and Kansai Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, Kansai Electric 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 Kansai Electric will offset losses from the drop in Kansai Electric's long position.
The idea behind Philip Morris International and The Kansai Electric pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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