Correlation Between HP and Philip Morris
Can any of the company-specific risk be diversified away by investing in both HP 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 HP and Philip Morris into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HP Inc and Philip Morris International, you can compare the effects of market volatilities on HP 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 HP with a short position of Philip Morris. Check out your portfolio center. Please also check ongoing floating volatility patterns of HP and Philip Morris.
Diversification Opportunities for HP and Philip Morris
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HP and Philip is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding HP Inc 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 HP 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 HP Inc 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 HP i.e., HP and Philip Morris go up and down completely randomly.
Pair Corralation between HP and Philip Morris
Considering the 90-day investment horizon HP Inc is expected to generate 1.46 times more return on investment than Philip Morris. However, HP is 1.46 times more volatile than Philip Morris International. It trades about 0.06 of its potential returns per unit of risk. Philip Morris International is currently generating about 0.03 per unit of risk. If you would invest 2,542 in HP Inc on January 20, 2024 and sell it today you would earn a total of 220.00 from holding HP Inc or generate 8.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.19% |
Values | Daily Returns |
HP Inc vs. Philip Morris International
Performance |
Timeline |
HP Inc |
Philip Morris Intern |
HP and Philip Morris Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HP and Philip Morris
The main advantage of trading using opposite HP and Philip Morris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HP 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 HP Inc 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.Philip Morris vs. Green Cures Botanical | Philip Morris vs. Easton Pharmaceutica | Philip Morris vs. Rocky Mountain High | Philip Morris vs. American Green |
Check out your portfolio center.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities |