Correlation Between Vector and Philip Morris

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

By analyzing existing cross correlation between Vector Group and Philip Morris International, you can compare the effects of market volatilities on Vector and Philip Morris 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 Vector with a short position of Philip Morris. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vector and Philip Morris.

Diversification Opportunities for Vector and Philip Morris

0.48

Correlation Coefficient

Vector  Philip Morris

Very weak diversification

The 3 months correlation between Vector and Philip is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Vector Group and Philip Morris International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Philip Morris Intern and Vector 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 Vector Group are associated (or correlated) with Philip Morris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Philip Morris Intern has no effect on the direction of Vector i.e., Vector and Philip Morris go up and down completely randomly.

Pair Corralation between Vector and Philip Morris

Considering the 90-day investment horizon Vector is expected to generate 50.81 times less return on investment than Philip Morris. But when comparing it to its historical volatility, Vector Group is 9.14 times less risky than Philip Morris. It trades about 0.01 of its potential returns per unit of risk. Philip Morris International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  12,192  in Philip Morris International on August 30, 2024 and sell it today you would earn a total of  990.00  from holding Philip Morris International or generate 8.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	42.19%
Values	Daily Returns

Vector Group  vs.  Philip Morris International

Vector Group

Risk-Adjusted Performance

0 of 100

Weak

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

Philip Morris Intern

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Philip Morris International are ranked lower than 6 (%) 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.

Pair Trading with Vector and Philip Morris

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

The idea behind Vector Group and Philip Morris 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.