Correlation Between Reynolds American and Altria

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

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

Diversification Opportunities for Reynolds American and Altria

0.0

Correlation Coefficient

Reynolds American  Altria

Pay attention - limited upside

The 3 months correlation between Reynolds and Altria is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Reynolds American and Altria Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altria Group and Reynolds American 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 Reynolds American are associated (or correlated) with Altria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altria Group has no effect on the direction of Reynolds American i.e., Reynolds American and Altria go up and down completely randomly.

Pair Corralation between Reynolds American and Altria

If you would invest (100.00) in Reynolds American on January 26, 2024 and sell it today you would earn a total of  100.00  from holding Reynolds American or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Reynolds American  vs.  Altria Group

Reynolds American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reynolds American has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Reynolds American is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Altria Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Altria Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Altria may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Reynolds American and Altria

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

The idea behind Reynolds American and Altria 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.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.