Correlation Between 22nd Century and Altria
Can any of the company-specific risk be diversified away by investing in both 22nd Century and Altria 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 22nd Century and Altria into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 22nd Century Group and Altria Group, you can compare the effects of market volatilities on 22nd Century and Altria 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 22nd Century with a short position of Altria. Check out your portfolio center. Please also check ongoing floating volatility patterns of 22nd Century and Altria.
Diversification Opportunities for 22nd Century and Altria
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 22nd and Altria is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding 22nd Century Group and Altria Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria Group and 22nd Century 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 22nd Century Group are associated (or correlated) with Altria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altria Group has no effect on the direction of 22nd Century i.e., 22nd Century and Altria go up and down completely randomly.
Pair Corralation between 22nd Century and Altria
Given the investment horizon of 90 days 22nd Century Group is expected to generate 58.25 times more return on investment than Altria. However, 22nd Century is 58.25 times more volatile than Altria Group. It trades about 0.05 of its potential returns per unit of risk. Altria Group is currently generating about 0.13 per unit of risk. If you would invest 1,889 in 22nd Century Group on November 3, 2024 and sell it today you would lose (1,478) from holding 22nd Century Group or give up 78.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
22nd Century Group vs. Altria Group
Performance |
| Timeline |
| 22nd Century Group |
| Altria Group |
22nd Century and Altria Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 22nd Century and Altria
The main advantage of trading using opposite 22nd Century and Altria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 22nd Century position performs unexpectedly, Altria 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 Altria will offset losses from the drop in Altria's long position.| 22nd Century vs. Turning Point Brands | 22nd Century vs. Green Globe International | 22nd Century vs. Imperial Brands PLC | 22nd Century vs. Kaival Brands Innovations |
| Altria vs. British American Tobacco | Altria vs. Universal | Altria vs. Imperial Brands PLC | Altria 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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