Correlation Between Altria and Consumer Staples

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

By analyzing existing cross correlation between Altria Group and Consumer Staples Portfolio, you can compare the effects of market volatilities on Altria and Consumer Staples 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 Altria with a short position of Consumer Staples. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altria and Consumer Staples.

Diversification Opportunities for Altria and Consumer Staples

-0.52

Correlation Coefficient

Altria  Consumer Staples

Excellent diversification

The 3 months correlation between Altria and Consumer is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and Consumer Staples Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Staples Por and Altria 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 Altria Group are associated (or correlated) with Consumer Staples. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Staples Por has no effect on the direction of Altria i.e., Altria and Consumer Staples go up and down completely randomly.

Pair Corralation between Altria and Consumer Staples

Allowing for the 90-day total investment horizon Altria is expected to generate 4.18 times less return on investment than Consumer Staples. In addition to that, Altria is 1.66 times more volatile than Consumer Staples Portfolio. It trades about 0.04 of its total potential returns per unit of risk. Consumer Staples Portfolio is currently generating about 0.25 per unit of volatility. If you would invest  9,617  in Consumer Staples Portfolio on September 13, 2024 and sell it today you would earn a total of  300.00  from holding Consumer Staples Portfolio or generate 3.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Altria Group  vs.  Consumer Staples Portfolio

Altria Group

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Altria Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Altria is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Consumer Staples Por

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consumer Staples Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Consumer Staples is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Altria and Consumer Staples

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

The idea behind Altria Group and Consumer Staples Portfolio 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.

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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.