Correlation Between PARKEN Sport and Scandinavian Tobacco

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

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

Diversification Opportunities for PARKEN Sport and Scandinavian Tobacco

0.75

Correlation Coefficient

PARKEN Sport  Scandinavian Tobacco

Poor diversification

The 3 months correlation between PARKEN and Scandinavian is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding PARKEN Sport Entertainment and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and PARKEN Sport 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 PARKEN Sport Entertainment 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 PARKEN Sport i.e., PARKEN Sport and Scandinavian Tobacco go up and down completely randomly.

Pair Corralation between PARKEN Sport and Scandinavian Tobacco

Assuming the 90 days trading horizon PARKEN Sport is expected to generate 1.0 times less return on investment than Scandinavian Tobacco. In addition to that, PARKEN Sport is 2.23 times more volatile than Scandinavian Tobacco Group. It trades about 0.12 of its total potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.27 per unit of volatility. If you would invest  9,470  in Scandinavian Tobacco Group on December 1, 2024 and sell it today you would earn a total of  1,390  from holding Scandinavian Tobacco Group or generate 14.68% return on investment over 90 days.

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

PARKEN Sport Entertainment  vs.  Scandinavian Tobacco Group

PARKEN Sport Enterta

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PARKEN Sport Entertainment are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, PARKEN Sport sustained solid returns over the last few months and may actually be approaching a breakup point.

Scandinavian Tobacco

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Scandinavian Tobacco Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Scandinavian Tobacco displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PARKEN Sport and Scandinavian Tobacco

The main advantage of trading using opposite PARKEN Sport and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PARKEN Sport 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 PARKEN Sport Entertainment 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.