Correlation Between Scandinavian Tobacco and HomeToGo

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

Diversification Opportunities for Scandinavian Tobacco and HomeToGo

-0.5

Correlation Coefficient

Scandinavian Tobacco  HomeToGo

Very good diversification

The 3 months correlation between Scandinavian and HomeToGo is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and HomeToGo SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeToGo SE 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 HomeToGo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeToGo SE has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and HomeToGo go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and HomeToGo

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 0.55 times more return on investment than HomeToGo. However, Scandinavian Tobacco Group is 1.8 times less risky than HomeToGo. It trades about 0.13 of its potential returns per unit of risk. HomeToGo SE is currently generating about -0.04 per unit of risk. If you would invest  1,248  in Scandinavian Tobacco Group on December 26, 2024 and sell it today you would earn a total of  132.00  from holding Scandinavian Tobacco Group or generate 10.58% return on investment over 90 days.

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

Scandinavian Tobacco Group  vs.  HomeToGo SE

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 9 (%) 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.

HomeToGo SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days HomeToGo SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, HomeToGo is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Scandinavian Tobacco and HomeToGo

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

The idea behind Scandinavian Tobacco Group and HomeToGo SE 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.