Correlation Between Philip Morris and Target
Can any of the company-specific risk be diversified away by investing in both Philip Morris and Target 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 Target 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 Target, you can compare the effects of market volatilities on Philip Morris and Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Target.
Diversification Opportunities for Philip Morris and Target
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Philip and Target is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Philip Morris i.e., Philip Morris and Target go up and down completely randomly.
Pair Corralation between Philip Morris and Target
Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 0.54 times more return on investment than Target. However, Philip Morris International is 1.85 times less risky than Target. It trades about 0.13 of its potential returns per unit of risk. Target is currently generating about 0.0 per unit of risk. If you would invest 8,941 in Philip Morris International on August 24, 2024 and sell it today you would earn a total of 4,180 from holding Philip Morris International or generate 46.75% 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. Target
Performance |
| Timeline |
| Philip Morris Intern |
| Target |
Philip Morris and Target Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philip Morris and Target
The main advantage of trading using opposite Philip Morris and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.The idea behind Philip Morris International and Target 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.| Target vs. Costco Wholesale Corp | Target vs. BJs Wholesale Club | Target vs. Dollar Tree | Target vs. Dollar General |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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