Correlation Between Philip Morris and Fresh Del

Can any of the company-specific risk be diversified away by investing in both Philip Morris and Fresh Del 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 Fresh Del 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 Fresh Del Monte, you can compare the effects of market volatilities on Philip Morris and Fresh Del 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 Fresh Del. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Fresh Del.

Diversification Opportunities for Philip Morris and Fresh Del

0.65

Correlation Coefficient

Philip Morris  Fresh Del

Poor diversification

The 3 months correlation between Philip and Fresh is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Fresh Del Monte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresh Del Monte 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 Fresh Del. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresh Del Monte has no effect on the direction of Philip Morris i.e., Philip Morris and Fresh Del go up and down completely randomly.

Pair Corralation between Philip Morris and Fresh Del

Allowing for the 90-day total investment horizon Philip Morris International is expected to under-perform the Fresh Del. But the stock apears to be less risky and, when comparing its historical volatility, Philip Morris International is 1.05 times less risky than Fresh Del. The stock trades about -0.21 of its potential returns per unit of risk. The Fresh Del Monte is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,382  in Fresh Del Monte on September 19, 2024 and sell it today you would earn a total of  6.00  from holding Fresh Del Monte or generate 0.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Philip Morris International  vs.  Fresh Del Monte

Philip Morris Intern

Risk-Adjusted Performance

5 of 100

Modest

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

Fresh Del Monte

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fresh Del Monte are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Fresh Del reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Philip Morris and Fresh Del

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

The idea behind Philip Morris International and Fresh Del Monte 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.