Correlation Between Scandinavian Tobacco and Orsted AS

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

Diversification Opportunities for Scandinavian Tobacco and Orsted AS

0.61

Correlation Coefficient

Scandinavian Tobacco  Orsted AS

Poor diversification

The 3 months correlation between Scandinavian and Orsted is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Orsted AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orsted AS 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 Orsted AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orsted AS has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Orsted AS go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Orsted AS

Assuming the 90 days trading horizon Scandinavian Tobacco Group is expected to under-perform the Orsted AS. But the stock apears to be less risky and, when comparing its historical volatility, Scandinavian Tobacco Group is 1.98 times less risky than Orsted AS. The stock trades about -0.12 of its potential returns per unit of risk. The Orsted AS is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  39,200  in Orsted AS on September 1, 2024 and sell it today you would lose (20.00) from holding Orsted AS or give up 0.05% of portfolio value over 90 days.

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

Scandinavian Tobacco Group  vs.  Orsted AS

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 unsteady performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Orsted AS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orsted AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Orsted AS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Scandinavian Tobacco and Orsted AS

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

The idea behind Scandinavian Tobacco Group and Orsted AS 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.