Correlation Between Scandinavian ChemoTech and Beowulf Mining

Can any of the company-specific risk be diversified away by investing in both Scandinavian ChemoTech and Beowulf Mining 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 ChemoTech and Beowulf Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Scandinavian ChemoTech AB and Beowulf Mining PLC, you can compare the effects of market volatilities on Scandinavian ChemoTech and Beowulf Mining 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 ChemoTech with a short position of Beowulf Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian ChemoTech and Beowulf Mining.

Diversification Opportunities for Scandinavian ChemoTech and Beowulf Mining

0.41

Correlation Coefficient

Scandinavian ChemoTech  Beowulf Mining

Very weak diversification

The 3 months correlation between Scandinavian and Beowulf is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian ChemoTech AB and Beowulf Mining PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beowulf Mining PLC and Scandinavian ChemoTech 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 ChemoTech AB are associated (or correlated) with Beowulf Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beowulf Mining PLC has no effect on the direction of Scandinavian ChemoTech i.e., Scandinavian ChemoTech and Beowulf Mining go up and down completely randomly.

Pair Corralation between Scandinavian ChemoTech and Beowulf Mining

Assuming the 90 days trading horizon Scandinavian ChemoTech AB is expected to under-perform the Beowulf Mining. But the stock apears to be less risky and, when comparing its historical volatility, Scandinavian ChemoTech AB is 1.02 times less risky than Beowulf Mining. The stock trades about -0.21 of its potential returns per unit of risk. The Beowulf Mining PLC is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  274.00  in Beowulf Mining PLC on October 25, 2024 and sell it today you would lose (24.00) from holding Beowulf Mining PLC or give up 8.76% of portfolio value over 90 days.

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

Scandinavian ChemoTech AB  vs.  Beowulf Mining PLC

Scandinavian ChemoTech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scandinavian ChemoTech AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Beowulf Mining PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beowulf Mining PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Beowulf Mining is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Scandinavian ChemoTech and Beowulf Mining

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

The idea behind Scandinavian ChemoTech AB and Beowulf Mining PLC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.