Correlation Between Philip Morris and Zhihu
Can any of the company-specific risk be diversified away by investing in both Philip Morris and Zhihu 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 Zhihu 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 Zhihu Inc ADR, you can compare the effects of market volatilities on Philip Morris and Zhihu 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 Zhihu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Zhihu.
Diversification Opportunities for Philip Morris and Zhihu
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Philip and Zhihu is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Zhihu Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhihu Inc ADR 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 Zhihu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhihu Inc ADR has no effect on the direction of Philip Morris i.e., Philip Morris and Zhihu go up and down completely randomly.
Pair Corralation between Philip Morris and Zhihu
Allowing for the 90-day total investment horizon Philip Morris is expected to generate 1.45 times less return on investment than Zhihu. But when comparing it to its historical volatility, Philip Morris International is 2.29 times less risky than Zhihu. It trades about 0.32 of its potential returns per unit of risk. Zhihu Inc ADR is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 362.00 in Zhihu Inc ADR on November 30, 2024 and sell it today you would earn a total of 149.00 from holding Zhihu Inc ADR or generate 41.16% 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. Zhihu Inc ADR
Performance |
| Timeline |
| Philip Morris Intern |
| Zhihu Inc ADR |
Philip Morris and Zhihu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Philip Morris and Zhihu
The main advantage of trading using opposite Philip Morris and Zhihu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris position performs unexpectedly, Zhihu 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 Zhihu will offset losses from the drop in Zhihu's long position.| Philip Morris vs. British American Tobacco | Philip Morris vs. Universal | Philip Morris vs. Imperial Brands PLC | Philip Morris vs. Altria Group |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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