Correlation Between Philip Morris and Rocky Mountain
Can any of the company-specific risk be diversified away by investing in both Philip Morris and Rocky Mountain 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 Rocky Mountain 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 Rocky Mountain Chocolate, you can compare the effects of market volatilities on Philip Morris and Rocky Mountain 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 Rocky Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Rocky Mountain.
Diversification Opportunities for Philip Morris and Rocky Mountain
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Philip and Rocky is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Rocky Mountain Chocolate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Mountain Chocolate 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 Rocky Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Mountain Chocolate has no effect on the direction of Philip Morris i.e., Philip Morris and Rocky Mountain go up and down completely randomly.
Pair Corralation between Philip Morris and Rocky Mountain
Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 0.37 times more return on investment than Rocky Mountain. However, Philip Morris International is 2.68 times less risky than Rocky Mountain. It trades about 0.07 of its potential returns per unit of risk. Rocky Mountain Chocolate is currently generating about -0.04 per unit of risk. If you would invest 9,151 in Philip Morris International on August 27, 2024 and sell it today you would earn a total of 3,848 from holding Philip Morris International or generate 42.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Philip Morris International vs. Rocky Mountain Chocolate
Performance |
| Timeline |
| Philip Morris Intern |
| Rocky Mountain Chocolate |
Philip Morris and Rocky Mountain Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philip Morris and Rocky Mountain
The main advantage of trading using opposite Philip Morris and Rocky Mountain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, Rocky Mountain 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 Rocky Mountain will offset losses from the drop in Rocky Mountain's long position.| Philip Morris vs. British American Tobacco | Philip Morris vs. Universal | Philip Morris vs. Imperial Brands PLC | Philip Morris vs. Altria Group |
| Rocky Mountain vs. Mondelez International | Rocky Mountain vs. Tootsie Roll Industries | Rocky Mountain vs. Chocoladefabriken Lindt Sprngli | Rocky Mountain vs. Barry Callebaut AG |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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