Correlation Between Philip Morris and Treehouse Foods
Can any of the company-specific risk be diversified away by investing in both Philip Morris and Treehouse Foods 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 Treehouse Foods 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 Treehouse Foods, you can compare the effects of market volatilities on Philip Morris and Treehouse Foods 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 Treehouse Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Treehouse Foods.
Diversification Opportunities for Philip Morris and Treehouse Foods
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Philip and Treehouse is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Treehouse Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treehouse Foods 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 Treehouse Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treehouse Foods has no effect on the direction of Philip Morris i.e., Philip Morris and Treehouse Foods go up and down completely randomly.
Pair Corralation between Philip Morris and Treehouse Foods
Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 0.46 times more return on investment than Treehouse Foods. However, Philip Morris International is 2.15 times less risky than Treehouse Foods. It trades about -0.02 of its potential returns per unit of risk. Treehouse Foods is currently generating about -0.04 per unit of risk. If you would invest 13,141 in Philip Morris International on August 24, 2024 and sell it today you would lose (142.00) from holding Philip Morris International or give up 1.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Philip Morris International vs. Treehouse Foods
Performance |
| Timeline |
| Philip Morris Intern |
| Treehouse Foods |
Philip Morris and Treehouse Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philip Morris and Treehouse Foods
The main advantage of trading using opposite Philip Morris and Treehouse Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, Treehouse Foods 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 Treehouse Foods will offset losses from the drop in Treehouse Foods' long position.| Philip Morris vs. British American Tobacco | Philip Morris vs. Universal | Philip Morris vs. Imperial Brands PLC | Philip Morris vs. Altria Group |
| Treehouse Foods vs. Lancaster Colony | Treehouse Foods vs. John B Sanfilippo | Treehouse Foods vs. Seneca Foods Corp | Treehouse Foods vs. Post Holdings |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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