Correlation Between Philip Morris and Westrock Coffee
Can any of the company-specific risk be diversified away by investing in both Philip Morris and Westrock Coffee 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 Westrock Coffee 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 Westrock Coffee, you can compare the effects of market volatilities on Philip Morris and Westrock Coffee 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 Westrock Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Westrock Coffee.
Diversification Opportunities for Philip Morris and Westrock Coffee
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Philip and Westrock is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee 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 Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of Philip Morris i.e., Philip Morris and Westrock Coffee go up and down completely randomly.
Pair Corralation between Philip Morris and Westrock Coffee
Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 0.95 times more return on investment than Westrock Coffee. However, Philip Morris International is 1.05 times less risky than Westrock Coffee. It trades about 0.4 of its potential returns per unit of risk. Westrock Coffee is currently generating about -0.03 per unit of risk. If you would invest 12,381 in Philip Morris International on November 21, 2024 and sell it today you would earn a total of 2,665 from holding Philip Morris International or generate 21.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Philip Morris International vs. Westrock Coffee
Performance |
Timeline |
Philip Morris Intern |
Westrock Coffee |
Philip Morris and Westrock Coffee Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Philip Morris and Westrock Coffee
The main advantage of trading using opposite Philip Morris and Westrock Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, Westrock Coffee 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 Westrock Coffee will offset losses from the drop in Westrock Coffee's long position.Philip Morris vs. British American Tobacco | ||
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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