Correlation Between Philip Morris and Playtech Plc
Can any of the company-specific risk be diversified away by investing in both Philip Morris and Playtech Plc 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 Playtech Plc 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 Playtech plc, you can compare the effects of market volatilities on Philip Morris and Playtech Plc 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 Playtech Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Playtech Plc.
Diversification Opportunities for Philip Morris and Playtech Plc
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Philip and Playtech is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc 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 Playtech Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtech plc has no effect on the direction of Philip Morris i.e., Philip Morris and Playtech Plc go up and down completely randomly.
Pair Corralation between Philip Morris and Playtech Plc
Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 0.5 times more return on investment than Playtech Plc. However, Philip Morris International is 2.0 times less risky than Playtech Plc. It trades about 0.28 of its potential returns per unit of risk. Playtech plc is currently generating about -0.07 per unit of risk. If you would invest 12,110 in Philip Morris International on November 2, 2024 and sell it today you would earn a total of 922.00 from holding Philip Morris International or generate 7.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Philip Morris International vs. Playtech plc
Performance |
| Timeline |
| Philip Morris Intern |
| Playtech plc |
Philip Morris and Playtech Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philip Morris and Playtech Plc
The main advantage of trading using opposite Philip Morris and Playtech Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, Playtech Plc 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 Playtech Plc will offset losses from the drop in Playtech Plc's long position.| Philip Morris vs. British American Tobacco | Philip Morris vs. Universal | Philip Morris vs. Imperial Brands PLC | Philip Morris vs. Altria Group |
| Playtech Plc vs. EMCOR Group | Playtech Plc vs. The Gap, | Playtech Plc vs. Lithia Motors | Playtech Plc vs. Topbuild Corp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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