Correlation Between 47216FAA5 and Scandinavian Tobacco

Can any of the company-specific risk be diversified away by investing in both 47216FAA5 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 47216FAA5 and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US47216FAA57 and Scandinavian Tobacco Group, you can compare the effects of market volatilities on 47216FAA5 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 47216FAA5 with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of 47216FAA5 and Scandinavian Tobacco.

Diversification Opportunities for 47216FAA5 and Scandinavian Tobacco

0.4

Correlation Coefficient

47216FAA5  Scandinavian Tobacco

Very weak diversification

The 3 months correlation between 47216FAA5 and Scandinavian is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding US47216FAA57 and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and 47216FAA5 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 US47216FAA57 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 47216FAA5 i.e., 47216FAA5 and Scandinavian Tobacco go up and down completely randomly.

Pair Corralation between 47216FAA5 and Scandinavian Tobacco

Assuming the 90 days trading horizon US47216FAA57 is expected to generate 1.21 times more return on investment than Scandinavian Tobacco. However, 47216FAA5 is 1.21 times more volatile than Scandinavian Tobacco Group. It trades about -0.09 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.19 per unit of risk. If you would invest  9,680  in US47216FAA57 on September 29, 2024 and sell it today you would lose (484.00) from holding US47216FAA57 or give up 5.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.85%
Values	Daily Returns

US47216FAA57  vs.  Scandinavian Tobacco Group

US47216FAA57

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US47216FAA57 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 47216FAA5 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with 47216FAA5 and Scandinavian Tobacco

The main advantage of trading using opposite 47216FAA5 and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 47216FAA5 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 US47216FAA57 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.