Correlation Between Scandinavian Tobacco and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Japan 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 Scandinavian Tobacco and Japan Tobacco 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 Japan Tobacco, you can compare the effects of market volatilities on Scandinavian Tobacco and Japan 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 Scandinavian Tobacco with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Japan Tobacco.
Diversification Opportunities for Scandinavian Tobacco and Japan Tobacco
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Scandinavian and Japan is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco 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 Japan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Tobacco has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Japan Tobacco go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Japan Tobacco
Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 0.55 times more return on investment than Japan Tobacco. However, Scandinavian Tobacco Group is 1.83 times less risky than Japan Tobacco. It trades about 0.16 of its potential returns per unit of risk. Japan Tobacco is currently generating about -0.12 per unit of risk. If you would invest 1,402 in Scandinavian Tobacco Group on December 10, 2024 and sell it today you would earn a total of 38.00 from holding Scandinavian Tobacco Group or generate 2.71% 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. Japan Tobacco
Performance |
Timeline |
Scandinavian Tobacco |
Japan Tobacco |
Scandinavian Tobacco and Japan Tobacco Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Scandinavian Tobacco and Japan Tobacco
The main advantage of trading using opposite Scandinavian Tobacco and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Japan 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 Japan Tobacco will offset losses from the drop in Japan Tobacco's long position.Scandinavian Tobacco vs. Agricultural Bank of | Scandinavian Tobacco vs. AUST AGRICULTURAL | Scandinavian Tobacco vs. Advanced Medical Solutions | Scandinavian Tobacco vs. IMAGIN MEDICAL INC |
Japan Tobacco vs. NorAm Drilling AS | Japan Tobacco vs. ULTRA CLEAN HLDGS | Japan Tobacco vs. Fevertree Drinks PLC | Japan Tobacco vs. ALERION CLEANPOWER |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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