Correlation Between Scandinavian Tobacco and Mastercard

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

Diversification Opportunities for Scandinavian Tobacco and Mastercard

0.49

Correlation Coefficient

Scandinavian Tobacco  Mastercard

Very weak diversification

The 3 months correlation between Scandinavian and Mastercard is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard 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 Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Mastercard go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Mastercard

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 1.03 times more return on investment than Mastercard. However, Scandinavian Tobacco is 1.03 times more volatile than Mastercard. It trades about 0.11 of its potential returns per unit of risk. Mastercard is currently generating about -0.04 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	Weak
Accuracy	100.0%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  Mastercard

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 fragile basic indicators, Scandinavian Tobacco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Mastercard

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mastercard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Mastercard 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 Mastercard

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

The idea behind Scandinavian Tobacco Group and Mastercard 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 Global Correlations module to find global opportunities by holding instruments from different markets.