Correlation Between Philip Morris and McCormick Company
Can any of the company-specific risk be diversified away by investing in both Philip Morris and McCormick Company 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 McCormick Company 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 McCormick Company Incorporated, you can compare the effects of market volatilities on Philip Morris and McCormick Company 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 McCormick Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and McCormick Company.
Diversification Opportunities for Philip Morris and McCormick Company
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Philip and McCormick is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and McCormick Company Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on McCormick Company 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 McCormick Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of McCormick Company has no effect on the direction of Philip Morris i.e., Philip Morris and McCormick Company go up and down completely randomly.
Pair Corralation between Philip Morris and McCormick Company
Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 1.19 times more return on investment than McCormick Company. However, Philip Morris is 1.19 times more volatile than McCormick Company Incorporated. It trades about 0.17 of its potential returns per unit of risk. McCormick Company Incorporated is currently generating about 0.07 per unit of risk. If you would invest 9,767 in Philip Morris International on August 24, 2024 and sell it today you would earn a total of 3,354 from holding Philip Morris International or generate 34.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Philip Morris International vs. McCormick Company Incorporated
Performance |
| Timeline |
| Philip Morris Intern |
| McCormick Company |
Philip Morris and McCormick Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philip Morris and McCormick Company
The main advantage of trading using opposite Philip Morris and McCormick Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, McCormick Company 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 McCormick Company will offset losses from the drop in McCormick Company's long position.The idea behind Philip Morris International and McCormick Company Incorporated 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.| McCormick Company vs. ConAgra Foods | McCormick Company vs. Campbell Soup | McCormick Company vs. Kellanova | McCormick Company vs. General Mills |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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