Correlation Between Scandinavian Tobacco and Range Resources

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

Diversification Opportunities for Scandinavian Tobacco and Range Resources

-0.84

Correlation Coefficient

Scandinavian Tobacco  Range Resources

Pay attention - limited upside

The 3 months correlation between Scandinavian and Range is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Range Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Range Resources Corp 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 Range Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Range Resources Corp has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Range Resources go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Range Resources

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 5.05 times more return on investment than Range Resources. However, Scandinavian Tobacco is 5.05 times more volatile than Range Resources Corp. It trades about 0.05 of its potential returns per unit of risk. Range Resources Corp is currently generating about 0.09 per unit of risk. If you would invest  769.00  in Scandinavian Tobacco Group on October 21, 2024 and sell it today you would earn a total of  543.00  from holding Scandinavian Tobacco Group or generate 70.61% return on investment over 90 days.

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

Scandinavian Tobacco Group  vs.  Range Resources Corp

Scandinavian Tobacco

Risk-Adjusted Performance

0 of 100

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 nearly stable basic indicators, Scandinavian Tobacco is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Range Resources Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Range Resources Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Range Resources 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 Range Resources

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

The idea behind Scandinavian Tobacco Group and Range Resources Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.