Correlation Between Alfa Financial and Scandinavian Tobacco

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

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

Diversification Opportunities for Alfa Financial and Scandinavian Tobacco

-0.66

Correlation Coefficient

Alfa Financial  Scandinavian Tobacco

Excellent diversification

The 3 months correlation between Alfa and Scandinavian is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Alfa Financial 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 Alfa Financial Software are associated (or correlated) with Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of Alfa Financial i.e., Alfa Financial and Scandinavian Tobacco go up and down completely randomly.

Pair Corralation between Alfa Financial and Scandinavian Tobacco

Assuming the 90 days trading horizon Alfa Financial Software is expected to generate 1.8 times more return on investment than Scandinavian Tobacco. However, Alfa Financial is 1.8 times more volatile than Scandinavian Tobacco Group. It trades about 0.11 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.12 per unit of risk. If you would invest  19,004  in Alfa Financial Software on September 4, 2024 and sell it today you would earn a total of  2,896  from holding Alfa Financial Software or generate 15.24% return on investment over 90 days.

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

Alfa Financial Software  vs.  Scandinavian Tobacco Group

Alfa Financial Software

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Financial Software are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alfa Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Alfa Financial and Scandinavian Tobacco

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

The idea behind Alfa Financial Software and Scandinavian Tobacco Group 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.