Correlation Between Philip Morris and Village Farms

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

Diversification Opportunities for Philip Morris and Village Farms

-0.43

Correlation Coefficient

Philip Morris  Village Farms

Very good diversification

The 3 months correlation between Philip and Village is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Village Farms International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Farms Intern 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 Village Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Farms Intern has no effect on the direction of Philip Morris i.e., Philip Morris and Village Farms go up and down completely randomly.

Pair Corralation between Philip Morris and Village Farms

Allowing for the 90-day total investment horizon Philip Morris International is expected to under-perform the Village Farms. But the stock apears to be less risky and, when comparing its historical volatility, Philip Morris International is 3.38 times less risky than Village Farms. The stock trades about -0.34 of its potential returns per unit of risk. The Village Farms International is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  78.00  in Village Farms International on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Village Farms International or generate 0.0% 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.  Village Farms International

Philip Morris Intern

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 1 (%) 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.

Village Farms Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Village Farms International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Philip Morris and Village Farms

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

The idea behind Philip Morris International and Village Farms International 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.