Correlation Between Scandinavian Tobacco and AcadeMedia

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

Diversification Opportunities for Scandinavian Tobacco and AcadeMedia

-0.14

Correlation Coefficient

Scandinavian Tobacco  AcadeMedia

Good diversification

The 3 months correlation between Scandinavian and AcadeMedia is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and AcadeMedia AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AcadeMedia AB 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 AcadeMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AcadeMedia AB has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and AcadeMedia go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and AcadeMedia

Assuming the 90 days trading horizon Scandinavian Tobacco Group is expected to under-perform the AcadeMedia. In addition to that, Scandinavian Tobacco is 1.02 times more volatile than AcadeMedia AB. It trades about -0.04 of its total potential returns per unit of risk. AcadeMedia AB is currently generating about 0.09 per unit of volatility. If you would invest  6,305  in AcadeMedia AB on October 25, 2024 and sell it today you would earn a total of  440.00  from holding AcadeMedia AB or generate 6.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  AcadeMedia AB

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 comparatively stable basic indicators, Scandinavian Tobacco is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

AcadeMedia AB

Risk-Adjusted Performance

7 of 100

Modest

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

Pair Trading with Scandinavian Tobacco and AcadeMedia

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

The idea behind Scandinavian Tobacco Group and AcadeMedia AB 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.