Correlation Between Scandinavian Tobacco and Morgan Advanced

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

Diversification Opportunities for Scandinavian Tobacco and Morgan Advanced

-0.72

Correlation Coefficient

Scandinavian Tobacco  Morgan Advanced

Pay attention - limited upside

The 3 months correlation between Scandinavian and Morgan is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Morgan Advanced Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Advanced Materials 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 Morgan Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Advanced Materials has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Morgan Advanced go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Morgan Advanced

Assuming the 90 days trading horizon Scandinavian Tobacco Group is expected to generate 0.49 times more return on investment than Morgan Advanced. However, Scandinavian Tobacco Group is 2.02 times less risky than Morgan Advanced. It trades about 0.35 of its potential returns per unit of risk. Morgan Advanced Materials is currently generating about 0.02 per unit of risk. If you would invest  9,365  in Scandinavian Tobacco Group on October 22, 2024 and sell it today you would earn a total of  540.00  from holding Scandinavian Tobacco Group or generate 5.77% return on investment over 90 days.

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

Scandinavian Tobacco Group  vs.  Morgan Advanced Materials

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.

Morgan Advanced Materials

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Advanced Materials are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Morgan Advanced is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Scandinavian Tobacco and Morgan Advanced

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

The idea behind Scandinavian Tobacco Group and Morgan Advanced Materials 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..