Correlation Between Scandinavian Tobacco and EastGroup Properties

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

Diversification Opportunities for Scandinavian Tobacco and EastGroup Properties

0.82

Correlation Coefficient

Scandinavian Tobacco  EastGroup Properties

Very poor diversification

The 3 months correlation between Scandinavian and EastGroup is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and EastGroup Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EastGroup Properties 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 EastGroup Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EastGroup Properties has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and EastGroup Properties go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and EastGroup Properties

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 0.84 times more return on investment than EastGroup Properties. However, Scandinavian Tobacco Group is 1.2 times less risky than EastGroup Properties. It trades about 0.24 of its potential returns per unit of risk. EastGroup Properties is currently generating about 0.1 per unit of risk. If you would invest  1,345  in Scandinavian Tobacco Group on December 24, 2024 and sell it today you would earn a total of  240.00  from holding Scandinavian Tobacco Group or generate 17.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	93.75%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  EastGroup Properties

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 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Scandinavian Tobacco reported solid returns over the last few months and may actually be approaching a breakup point.

EastGroup Properties

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EastGroup Properties are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, EastGroup Properties may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Scandinavian Tobacco and EastGroup Properties

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

The idea behind Scandinavian Tobacco Group and EastGroup Properties 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.