Correlation Between Philip Morris and Eastern

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

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

Diversification Opportunities for Philip Morris and Eastern

-0.47

Correlation Coefficient

Philip Morris  Eastern

Very good diversification

The 3 months correlation between Philip and Eastern is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Eastern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern and Philip Morris 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 Philip Morris International are associated (or correlated) with Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern has no effect on the direction of Philip Morris i.e., Philip Morris and Eastern go up and down completely randomly.

Pair Corralation between Philip Morris and Eastern

Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 0.78 times more return on investment than Eastern. However, Philip Morris International is 1.28 times less risky than Eastern. It trades about 0.05 of its potential returns per unit of risk. Eastern Co is currently generating about 0.0 per unit of risk. If you would invest  12,379  in Philip Morris International on September 5, 2024 and sell it today you would earn a total of  590.00  from holding Philip Morris International or generate 4.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Philip Morris International  vs.  Eastern Co

Philip Morris Intern

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Philip Morris is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Eastern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastern Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, Eastern is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Philip Morris and Eastern

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

The idea behind Philip Morris International and Eastern Co 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 Stocks Directory module to find actively traded stocks across global markets.