Correlation Between Philip Morris and PVH Corp

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

Diversification Opportunities for Philip Morris and PVH Corp

0.08

Correlation Coefficient

Philip Morris  PVH Corp

Significant diversification

The 3 months correlation between Philip and PVH is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and PVH Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PVH Corp 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 PVH Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PVH Corp has no effect on the direction of Philip Morris i.e., Philip Morris and PVH Corp go up and down completely randomly.

Pair Corralation between Philip Morris and PVH Corp

Allowing for the 90-day total investment horizon Philip Morris International is expected to generate 0.19 times more return on investment than PVH Corp. However, Philip Morris International is 5.16 times less risky than PVH Corp. It trades about -0.12 of its potential returns per unit of risk. PVH Corp is currently generating about -0.21 per unit of risk. If you would invest  9,364  in Philip Morris International on January 20, 2024 and sell it today you would lose (244.00) from holding Philip Morris International or give up 2.61% of portfolio value over 90 days.

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

Philip Morris International  vs.  PVH Corp

Philip Morris Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Philip Morris International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Philip Morris is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

PVH Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PVH Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Philip Morris and PVH Corp

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

The idea behind Philip Morris International and PVH Corp 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.