Correlation Between Ishares Trust and PHILIP

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

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

Diversification Opportunities for Ishares Trust and PHILIP

-0.63

Correlation Coefficient

Ishares Trust  PHILIP

Excellent diversification

The 3 months correlation between Ishares and PHILIP is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Trust 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 Ishares Trust 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 Ishares Trust 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 Ishares Trust i.e., Ishares Trust and PHILIP go up and down completely randomly.

Pair Corralation between Ishares Trust and PHILIP

Given the investment horizon of 90 days Ishares Trust is expected to generate 1.48 times more return on investment than PHILIP. However, Ishares Trust is 1.48 times more volatile than PHILIP MORRIS INTL. It trades about 0.1 of its potential returns per unit of risk. PHILIP MORRIS INTL is currently generating about -0.06 per unit of risk. If you would invest  3,069  in Ishares Trust on September 23, 2024 and sell it today you would earn a total of  245.00  from holding Ishares Trust or generate 7.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.85%
Values	Daily Returns

Ishares Trust   vs.  PHILIP MORRIS INTL

Ishares Trust

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Ishares Trust 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 somewhat strong basic indicators, PHILIP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ishares Trust and PHILIP

The main advantage of trading using opposite Ishares Trust and PHILIP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Trust 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 Ishares Trust 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.