Correlation Between Philip Morris and Colt CZ

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

By analyzing existing cross correlation between Philip Morris CR and Colt CZ Group, you can compare the effects of market volatilities on Philip Morris and Colt CZ 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 Colt CZ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Philip Morris and Colt CZ.

Diversification Opportunities for Philip Morris and Colt CZ

-0.7

Correlation Coefficient

Philip Morris  Colt CZ

Excellent diversification

The 3 months correlation between Philip and Colt is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris CR and Colt CZ Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colt CZ Group 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 CR are associated (or correlated) with Colt CZ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colt CZ Group has no effect on the direction of Philip Morris i.e., Philip Morris and Colt CZ go up and down completely randomly.

Pair Corralation between Philip Morris and Colt CZ

Assuming the 90 days trading horizon Philip Morris CR is expected to generate 0.65 times more return on investment than Colt CZ. However, Philip Morris CR is 1.55 times less risky than Colt CZ. It trades about 0.17 of its potential returns per unit of risk. Colt CZ Group is currently generating about -0.07 per unit of risk. If you would invest  1,518,000  in Philip Morris CR on August 30, 2024 and sell it today you would earn a total of  104,000  from holding Philip Morris CR or generate 6.85% return on investment over 90 days.

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

Philip Morris CR  vs.  Colt CZ Group

Philip Morris CR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris CR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Philip Morris may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Colt CZ Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Colt CZ Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Colt CZ is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Philip Morris and Colt CZ

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

The idea behind Philip Morris CR and Colt CZ Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.