Correlation Between Scandinavian Tobacco and Panasonic Corp

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

Diversification Opportunities for Scandinavian Tobacco and Panasonic Corp

-0.79

Correlation Coefficient

Scandinavian Tobacco  Panasonic Corp

Pay attention - limited upside

The 3 months correlation between Scandinavian and Panasonic is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Panasonic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Panasonic Corp 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 Panasonic Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Panasonic Corp has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Panasonic Corp go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Panasonic Corp

Assuming the 90 days trading horizon Scandinavian Tobacco Group is expected to under-perform the Panasonic Corp. But the stock apears to be less risky and, when comparing its historical volatility, Scandinavian Tobacco Group is 1.97 times less risky than Panasonic Corp. The stock trades about -0.1 of its potential returns per unit of risk. The Panasonic Corp is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  130,721  in Panasonic Corp on October 9, 2024 and sell it today you would earn a total of  31,179  from holding Panasonic Corp or generate 23.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	47.54%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  Panasonic Corp

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 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.

Panasonic Corp

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Panasonic Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Panasonic Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scandinavian Tobacco and Panasonic Corp

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

The idea behind Scandinavian Tobacco Group and Panasonic Corp 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.