Correlation Between Philip Morris and Consumer Staples

Can any of the company-specific risk be diversified away by investing in both Philip Morris 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 Philip Morris and Consumer Staples 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 Consumer Staples Portfolio, you can compare the effects of market volatilities on Philip Morris 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 Philip Morris with a short position of Consumer Staples. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Consumer Staples.

Diversification Opportunities for Philip Morris and Consumer Staples

-0.48

Correlation Coefficient

Philip Morris  Consumer Staples

Very good diversification

The 3 months correlation between Philip and Consumer is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International 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 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 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 Philip Morris i.e., Philip Morris and Consumer Staples go up and down completely randomly.

Pair Corralation between Philip Morris and Consumer Staples

Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 2.03 times more return on investment than Consumer Staples. However, Philip Morris is 2.03 times more volatile than Consumer Staples Portfolio. It trades about 0.13 of its potential returns per unit of risk. Consumer Staples Portfolio is currently generating about 0.23 per unit of risk. If you would invest  12,495  in Philip Morris International on September 12, 2024 and sell it today you would earn a total of  403.00  from holding Philip Morris International or generate 3.23% 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.  Consumer Staples Portfolio

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.

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 Philip Morris and Consumer Staples

The main advantage of trading using opposite Philip Morris and Consumer Staples positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Philip Morris 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 Philip Morris International 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.

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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.