Correlation Between BW Offshore and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both BW Offshore 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 BW Offshore and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BW Offshore and Scandinavian Tobacco Group, you can compare the effects of market volatilities on BW Offshore 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 BW Offshore with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of BW Offshore and Scandinavian Tobacco.
Diversification Opportunities for BW Offshore and Scandinavian Tobacco
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between 0RKH and Scandinavian is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BW Offshore and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and BW Offshore 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 BW Offshore 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 BW Offshore i.e., BW Offshore and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between BW Offshore and Scandinavian Tobacco
Assuming the 90 days trading horizon BW Offshore is expected to generate 1.84 times more return on investment than Scandinavian Tobacco. However, BW Offshore is 1.84 times more volatile than Scandinavian Tobacco Group. It trades about 0.04 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.0 per unit of risk. If you would invest 2,164 in BW Offshore on October 20, 2024 and sell it today you would earn a total of 911.00 from holding BW Offshore or generate 42.1% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.4% |
Values | Daily Returns |
BW Offshore vs. Scandinavian Tobacco Group
Performance |
Timeline |
BW Offshore |
Scandinavian Tobacco |
BW Offshore and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BW Offshore and Scandinavian Tobacco
The main advantage of trading using opposite BW Offshore and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BW Offshore 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.BW Offshore vs. AMG Advanced Metallurgical | BW Offshore vs. Panther Metals PLC | BW Offshore vs. Blackrock World Mining | BW Offshore vs. Cornish Metals |
Scandinavian Tobacco vs. Beeks Trading | Scandinavian Tobacco vs. Central Asia Metals | Scandinavian Tobacco vs. Jacquet Metal Service | Scandinavian Tobacco vs. Mobius Investment Trust |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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