Correlation Between CRA International and PHILIP

Can any of the company-specific risk be diversified away by investing in both CRA International and PHILIP 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 CRA International and PHILIP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CRA International and PHILIP MORRIS INTL, you can compare the effects of market volatilities on CRA International and PHILIP 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 CRA International with a short position of PHILIP. Check out your portfolio center. Please also check ongoing floating volatility patterns of CRA International and PHILIP.

Diversification Opportunities for CRA International and PHILIP

-0.68

Correlation Coefficient

CRA International  PHILIP

Excellent diversification

The 3 months correlation between CRA and PHILIP is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding CRA International and PHILIP MORRIS INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHILIP MORRIS INTL and CRA International 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 CRA International are associated (or correlated) with PHILIP. 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 INTL has no effect on the direction of CRA International i.e., CRA International and PHILIP go up and down completely randomly.

Pair Corralation between CRA International and PHILIP

Given the investment horizon of 90 days CRA International is expected to under-perform the PHILIP. In addition to that, CRA International is 2.12 times more volatile than PHILIP MORRIS INTL. It trades about -0.01 of its total potential returns per unit of risk. PHILIP MORRIS INTL is currently generating about 0.1 per unit of volatility. If you would invest  8,746  in PHILIP MORRIS INTL on September 23, 2024 and sell it today you would earn a total of  419.00  from holding PHILIP MORRIS INTL or generate 4.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.02%
Values	Daily Returns

CRA International  vs.  PHILIP MORRIS INTL

CRA International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CRA International are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CRA International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PHILIP MORRIS INTL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PHILIP MORRIS INTL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PHILIP MORRIS INTL investors.

Pair Trading with CRA International and PHILIP

The main advantage of trading using opposite CRA International and PHILIP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CRA International position performs unexpectedly, PHILIP 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 will offset losses from the drop in PHILIP's long position.

The idea behind CRA International and PHILIP MORRIS INTL pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.