Correlation Between Scandinavian Tobacco and ITALIAN WINE

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

Diversification Opportunities for Scandinavian Tobacco and ITALIAN WINE

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Scandinavian and ITALIAN is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and ITALIAN WINE BRANDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITALIAN WINE BRANDS 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 ITALIAN WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITALIAN WINE BRANDS has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and ITALIAN WINE go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and ITALIAN WINE

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 0.54 times more return on investment than ITALIAN WINE. However, Scandinavian Tobacco Group is 1.85 times less risky than ITALIAN WINE. It trades about 0.08 of its potential returns per unit of risk. ITALIAN WINE BRANDS is currently generating about 0.02 per unit of risk. If you would invest  1,270  in Scandinavian Tobacco Group on October 11, 2024 and sell it today you would earn a total of  22.00  from holding Scandinavian Tobacco Group or generate 1.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Scandinavian Tobacco Group  vs.  ITALIAN WINE BRANDS

 Performance 
       Timeline  
Scandinavian Tobacco 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Scandinavian Tobacco Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
ITALIAN WINE BRANDS 

Risk-Adjusted Performance

3 of 100

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

Scandinavian Tobacco and ITALIAN WINE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Scandinavian Tobacco and ITALIAN WINE

The main advantage of trading using opposite Scandinavian Tobacco and ITALIAN WINE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, ITALIAN WINE 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 ITALIAN WINE will offset losses from the drop in ITALIAN WINE's long position.
The idea behind Scandinavian Tobacco Group and ITALIAN WINE BRANDS 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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