Correlation Between Philip Morris and United Guardian
Can any of the company-specific risk be diversified away by investing in both Philip Morris and United Guardian 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 United Guardian 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 United Guardian, you can compare the effects of market volatilities on Philip Morris and United Guardian 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 United Guardian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and United Guardian.
Diversification Opportunities for Philip Morris and United Guardian
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Philip and United is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and United Guardian in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Guardian 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 United Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Guardian has no effect on the direction of Philip Morris i.e., Philip Morris and United Guardian go up and down completely randomly.
Pair Corralation between Philip Morris and United Guardian
Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 0.36 times more return on investment than United Guardian. However, Philip Morris International is 2.77 times less risky than United Guardian. It trades about 0.07 of its potential returns per unit of risk. United Guardian is currently generating about 0.01 per unit of risk. If you would invest 9,193 in Philip Morris International on August 30, 2024 and sell it today you would earn a total of 3,989 from holding Philip Morris International or generate 43.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Philip Morris International vs. United Guardian
Performance |
| Timeline |
| Philip Morris Intern |
| United Guardian |
Philip Morris and United Guardian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philip Morris and United Guardian
The main advantage of trading using opposite Philip Morris and United Guardian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, United Guardian 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 United Guardian will offset losses from the drop in United Guardian's long position.| Philip Morris vs. British American Tobacco | Philip Morris vs. Universal | Philip Morris vs. Imperial Brands PLC | Philip Morris vs. Altria Group |
| United Guardian vs. Utah Medical Products | United Guardian vs. Union Bankshares | United Guardian vs. Psychemedics | United Guardian vs. Unity Bancorp |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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