Correlation Between Scandinavian Tobacco and Travel +

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

Diversification Opportunities for Scandinavian Tobacco and Travel +

0.07

Correlation Coefficient

Scandinavian Tobacco  Travel +

Significant diversification

The 3 months correlation between Scandinavian and Travel is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Travel Leisure Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travel Leisure 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 Travel +. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travel Leisure has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Travel + go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Travel +

Assuming the 90 days trading horizon Scandinavian Tobacco Group is expected to generate 8.85 times more return on investment than Travel +. However, Scandinavian Tobacco is 8.85 times more volatile than Travel Leisure Co. It trades about 0.09 of its potential returns per unit of risk. Travel Leisure Co is currently generating about 0.13 per unit of risk. If you would invest  9,601  in Scandinavian Tobacco Group on December 26, 2024 and sell it today you would earn a total of  579.00  from holding Scandinavian Tobacco Group or generate 6.03% return on investment over 90 days.

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

Scandinavian Tobacco Group  vs.  Travel Leisure Co

Scandinavian Tobacco

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scandinavian Tobacco Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Scandinavian Tobacco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Travel Leisure

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Travel Leisure Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Travel + is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Scandinavian Tobacco and Travel +

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

The idea behind Scandinavian Tobacco Group and Travel Leisure Co 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.