Correlation Between Turning Point and Philip Morris
Can any of the company-specific risk be diversified away by investing in both Turning Point and Philip Morris 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 Turning Point and Philip Morris into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Turning Point Brands and Philip Morris International, you can compare the effects of market volatilities on Turning Point and Philip Morris 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 Turning Point with a short position of Philip Morris. Check out your portfolio center. Please also check ongoing floating volatility patterns of Turning Point and Philip Morris.
Diversification Opportunities for Turning Point and Philip Morris
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Turning and Philip is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Turning Point Brands and Philip Morris International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris Intern and Turning Point 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 Turning Point Brands are associated (or correlated) with Philip Morris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philip Morris Intern has no effect on the direction of Turning Point i.e., Turning Point and Philip Morris go up and down completely randomly.
Pair Corralation between Turning Point and Philip Morris
Considering the 90-day investment horizon Turning Point Brands is expected to generate 1.39 times more return on investment than Philip Morris. However, Turning Point is 1.39 times more volatile than Philip Morris International. It trades about 0.56 of its potential returns per unit of risk. Philip Morris International is currently generating about 0.01 per unit of risk. 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 |
Turning Point Brands vs. Philip Morris International
Performance |
| Timeline |
| Turning Point Brands |
| Philip Morris Intern |
Turning Point and Philip Morris Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Turning Point and Philip Morris
The main advantage of trading using opposite Turning Point and Philip Morris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Turning Point position performs unexpectedly, Philip Morris 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 Philip Morris will offset losses from the drop in Philip Morris' long position.| Turning Point vs. Universal | Turning Point vs. Imperial Brands PLC | Turning Point vs. British American Tobacco | Turning Point vs. Philip Morris International |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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