Correlation Between Scandinavian Tobacco and Dollarama

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

Diversification Opportunities for Scandinavian Tobacco and Dollarama

0.66

Correlation Coefficient

Scandinavian Tobacco  Dollarama

Poor diversification

The 3 months correlation between Scandinavian and Dollarama is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Dollarama in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dollarama 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 Dollarama. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dollarama has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Dollarama go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Dollarama

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 1.06 times more return on investment than Dollarama. However, Scandinavian Tobacco is 1.06 times more volatile than Dollarama. It trades about 0.11 of its potential returns per unit of risk. Dollarama is currently generating about 0.05 per unit of risk. If you would invest  1,248  in Scandinavian Tobacco Group on December 24, 2024 and sell it today you would earn a total of  114.00  from holding Scandinavian Tobacco Group or generate 9.13% return on investment over 90 days.

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

Scandinavian Tobacco Group  vs.  Dollarama

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 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Scandinavian Tobacco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dollarama

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dollarama are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dollarama is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Scandinavian Tobacco and Dollarama

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

The idea behind Scandinavian Tobacco Group and Dollarama 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.