Correlation Between Philip Morris and Turning Point
Can any of the company-specific risk be diversified away by investing in both Philip Morris and Turning Point 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 Turning Point 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 Turning Point Brands, you can compare the effects of market volatilities on Philip Morris and Turning Point 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 Turning Point. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Turning Point.
Diversification Opportunities for Philip Morris and Turning Point
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Philip and Turning is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Turning Point Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Turning Point Brands 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 Turning Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Turning Point Brands has no effect on the direction of Philip Morris i.e., Philip Morris and Turning Point go up and down completely randomly.
Pair Corralation between Philip Morris and Turning Point
Allowing for the 90-day total investment horizon Philip Morris is expected to generate 61.56 times less return on investment than Turning Point. But when comparing it to its historical volatility, Philip Morris International is 1.39 times less risky than Turning Point. It trades about 0.01 of its potential returns per unit of risk. Turning Point Brands is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest 4,673 in Turning Point Brands on August 28, 2024 and sell it today you would earn a total of 1,438 from holding Turning Point Brands or generate 30.77% 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. Turning Point Brands
Performance |
| Timeline |
| Philip Morris Intern |
| Turning Point Brands |
Philip Morris and Turning Point Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philip Morris and Turning Point
The main advantage of trading using opposite Philip Morris and Turning Point positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, Turning Point 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 Turning Point will offset losses from the drop in Turning Point's long position.| Philip Morris vs. British American Tobacco | Philip Morris vs. Universal | Philip Morris vs. Imperial Brands PLC | Philip Morris vs. Altria Group |
| Turning Point vs. Universal | Turning Point vs. Imperial Brands PLC | Turning Point vs. British American Tobacco | Turning Point vs. Philip Morris International |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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