Correlation Between Philip Morris and Farmmi

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

Diversification Opportunities for Philip Morris and Farmmi

0.23

Correlation Coefficient

Philip Morris  Farmmi

Modest diversification

The 3 months correlation between Philip and Farmmi is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Philip Morris International and Farmmi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmmi Inc 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 Farmmi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmmi Inc has no effect on the direction of Philip Morris i.e., Philip Morris and Farmmi go up and down completely randomly.

Pair Corralation between Philip Morris and Farmmi

Allowing for the 90-day total investment horizon Philip Morris International is expected to under-perform the Farmmi. But the stock apears to be less risky and, when comparing its historical volatility, Philip Morris International is 2.09 times less risky than Farmmi. The stock trades about -0.05 of its potential returns per unit of risk. The Farmmi Inc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  166.00  in Farmmi Inc on May 6, 2025 and sell it today you would earn a total of  4.00  from holding Farmmi Inc or generate 2.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Philip Morris International  vs.  Farmmi Inc

Philip Morris Intern

Risk-Adjusted Performance

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 recent stock price disarray, may contribute to short-term losses for the investors.

Farmmi Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Farmmi Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, Farmmi is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Philip Morris and Farmmi

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

The idea behind Philip Morris International and Farmmi Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.