Correlation Between Scandinavian Tobacco and Science Applications

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

Diversification Opportunities for Scandinavian Tobacco and Science Applications

0.77

Correlation Coefficient

Scandinavian Tobacco  Science Applications

Poor diversification

The 3 months correlation between Scandinavian and Science is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Science Applications Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Applications 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 Science Applications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Applications has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Science Applications go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Science Applications

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 3.17 times more return on investment than Science Applications. However, Scandinavian Tobacco is 3.17 times more volatile than Science Applications International. It trades about 0.06 of its potential returns per unit of risk. Science Applications International is currently generating about 0.01 per unit of risk. If you would invest  445.00  in Scandinavian Tobacco Group on September 24, 2024 and sell it today you would earn a total of  795.00  from holding Scandinavian Tobacco Group or generate 178.65% return on investment over 90 days.

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

Scandinavian Tobacco Group  vs.  Science Applications Internati

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. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Science Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Scandinavian Tobacco and Science Applications

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

The idea behind Scandinavian Tobacco Group and Science Applications 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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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.