Correlation Between LED IBond and Scandinavian Tobacco

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

By analyzing existing cross correlation between LED iBond International and Scandinavian Tobacco Group, you can compare the effects of market volatilities on LED IBond and Scandinavian 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 LED IBond with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of LED IBond and Scandinavian Tobacco.

Diversification Opportunities for LED IBond and Scandinavian Tobacco

-0.81

Correlation Coefficient

LED IBond  Scandinavian Tobacco

Pay attention - limited upside

The 3 months correlation between LED and Scandinavian is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding LED iBond International and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and LED IBond 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 LED iBond International are associated (or correlated) with Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of LED IBond i.e., LED IBond and Scandinavian Tobacco go up and down completely randomly.

Pair Corralation between LED IBond and Scandinavian Tobacco

Assuming the 90 days trading horizon LED iBond International is expected to generate 15.12 times more return on investment than Scandinavian Tobacco. However, LED IBond is 15.12 times more volatile than Scandinavian Tobacco Group. It trades about 0.12 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.09 per unit of risk. If you would invest  22.00  in LED iBond International on September 25, 2024 and sell it today you would earn a total of  11.00  from holding LED iBond International or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

LED iBond International  vs.  Scandinavian Tobacco Group

LED iBond International

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LED iBond International are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, LED IBond displayed solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with LED IBond and Scandinavian Tobacco

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

The idea behind LED iBond International and Scandinavian Tobacco Group 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.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.