Correlation Between Scandinavian Tobacco and Kinnevik Investment

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

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

Diversification Opportunities for Scandinavian Tobacco and Kinnevik Investment

0.25

Correlation Coefficient

Scandinavian Tobacco  Kinnevik Investment

Modest diversification

The 3 months correlation between Scandinavian and Kinnevik is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Kinnevik Investment AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinnevik Investment and Scandinavian Tobacco 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 Scandinavian Tobacco Group are associated (or correlated) with Kinnevik Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinnevik Investment has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Kinnevik Investment go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Kinnevik Investment

Assuming the 90 days trading horizon Scandinavian Tobacco Group is expected to generate 0.61 times more return on investment than Kinnevik Investment. However, Scandinavian Tobacco Group is 1.63 times less risky than Kinnevik Investment. It trades about -0.03 of its potential returns per unit of risk. Kinnevik Investment AB is currently generating about -0.06 per unit of risk. If you would invest  9,950  in Scandinavian Tobacco Group on September 25, 2024 and sell it today you would lose (585.00) from holding Scandinavian Tobacco Group or give up 5.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.22%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  Kinnevik Investment AB

Scandinavian Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scandinavian Tobacco Group 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 newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Kinnevik Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kinnevik Investment AB 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 newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Scandinavian Tobacco and Kinnevik Investment

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

The idea behind Scandinavian Tobacco Group and Kinnevik Investment AB 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 Commodity Directory module to find actively traded commodities issued by global exchanges.