Correlation Between Altria and Universal

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

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

Diversification Opportunities for Altria and Universal

-0.18

Correlation Coefficient

Altria  Universal

Good diversification

The 3 months correlation between Altria and Universal is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal and Altria 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 Altria Group are associated (or correlated) with Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Altria i.e., Altria and Universal go up and down completely randomly.

Pair Corralation between Altria and Universal

Allowing for the 90-day total investment horizon Altria is expected to generate 2.11 times less return on investment than Universal. But when comparing it to its historical volatility, Altria Group is 2.06 times less risky than Universal. It trades about 0.07 of its potential returns per unit of risk. Universal is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,020  in Universal on January 31, 2024 and sell it today you would earn a total of  138.00  from holding Universal or generate 2.75% return on investment over 90 days.

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

Altria Group  vs.  Universal

Altria Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Altria Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Altria may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Universal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Altria and Universal

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

The idea behind Altria Group and Universal 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 CEOs Directory module to screen CEOs from public companies around the world.