Correlation Between Philip Morris and TAAT Global

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

Diversification Opportunities for Philip Morris and TAAT Global

-0.32

Correlation Coefficient

Philip Morris  TAAT Global

Very good diversification

The 3 months correlation between Philip and TAAT is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and TAAT Global Alternatives in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAAT Global Alternatives 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 TAAT Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAAT Global Alternatives has no effect on the direction of Philip Morris i.e., Philip Morris and TAAT Global go up and down completely randomly.

Pair Corralation between Philip Morris and TAAT Global

Allowing for the 90-day total investment horizon Philip Morris is expected to generate 14.61 times less return on investment than TAAT Global. But when comparing it to its historical volatility, Philip Morris International is 11.79 times less risky than TAAT Global. It trades about 0.06 of its potential returns per unit of risk. TAAT Global Alternatives is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  19.00  in TAAT Global Alternatives on August 31, 2024 and sell it today you would lose (4.00) from holding TAAT Global Alternatives or give up 21.05% of portfolio value over 90 days.

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

Philip Morris International  vs.  TAAT Global Alternatives

Philip Morris Intern

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Philip Morris may actually be approaching a critical reversion point that can send shares even higher in December 2024.

TAAT Global Alternatives

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TAAT Global Alternatives are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, TAAT Global reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Philip Morris and TAAT Global

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

The idea behind Philip Morris International and TAAT Global Alternatives 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.