Correlation Between Porvair Plc and Scandinavian Tobacco

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

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

Diversification Opportunities for Porvair Plc and Scandinavian Tobacco

0.23

Correlation Coefficient

Porvair Plc  Scandinavian Tobacco

Modest diversification

The 3 months correlation between Porvair and Scandinavian is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Porvair plc and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Porvair Plc 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 Porvair plc 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 Porvair Plc i.e., Porvair Plc and Scandinavian Tobacco go up and down completely randomly.

Pair Corralation between Porvair Plc and Scandinavian Tobacco

Assuming the 90 days trading horizon Porvair plc is expected to under-perform the Scandinavian Tobacco. In addition to that, Porvair Plc is 1.9 times more volatile than Scandinavian Tobacco Group. It trades about -0.02 of its total potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.09 per unit of volatility. If you would invest  9,601  in Scandinavian Tobacco Group on December 26, 2024 and sell it today you would earn a total of  579.00  from holding Scandinavian Tobacco Group or generate 6.03% return on investment over 90 days.

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

Porvair plc  vs.  Scandinavian Tobacco Group

Porvair plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Porvair plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Porvair Plc is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Scandinavian Tobacco

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scandinavian Tobacco Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Scandinavian Tobacco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Porvair Plc and Scandinavian Tobacco

The main advantage of trading using opposite Porvair Plc and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porvair Plc 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 Porvair plc 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.