Correlation Between Under Armour and Philip Morris

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Can any of the company-specific risk be diversified away by investing in both Under Armour 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 Under Armour and Philip Morris into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Under Armour and Philip Morris International, you can compare the effects of market volatilities on Under Armour 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 Under Armour with a short position of Philip Morris. Check out your portfolio center. Please also check ongoing floating volatility patterns of Under Armour and Philip Morris.

Diversification Opportunities for Under Armour and Philip Morris

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Under and Philip is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour 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 Under Armour 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 Under Armour 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 Under Armour i.e., Under Armour and Philip Morris go up and down completely randomly.

Pair Corralation between Under Armour and Philip Morris

Allowing for the 90-day total investment horizon Under Armour is expected to under-perform the Philip Morris. In addition to that, Under Armour is 2.25 times more volatile than Philip Morris International. It trades about -0.03 of its total potential returns per unit of risk. Philip Morris International is currently generating about 0.03 per unit of volatility. If you would invest  7,364  in Philip Morris International on July 8, 2022 and sell it today you would earn a total of  1,333  from holding Philip Morris International or generate 18.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Under Armour Inc  vs.  Philip Morris International

 Performance (%) 
       Timeline  
Under Armour 
Under Performance
0 of 100
Over the last 90 days Under Armour has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Under Price Channel

Philip Morris Intern 
Philip Performance
0 of 100
Over the last 90 days Philip Morris International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's primary indicators remain steady and the new chaos on Wall Street may also be a sign of medium-term gains for the company stakeholders.

Philip Price Channel

Under Armour and Philip Morris Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Under Armour and Philip Morris

The main advantage of trading using opposite Under Armour and Philip Morris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Under Armour 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.
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The idea behind Under Armour 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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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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