Correlation Between Scandinavian Tobacco and Futuretech

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

Diversification Opportunities for Scandinavian Tobacco and Futuretech

-0.35

Correlation Coefficient

Scandinavian Tobacco  Futuretech

Very good diversification

The 3 months correlation between Scandinavian and Futuretech is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Futuretech II Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Futuretech II Acquisition 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 Futuretech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Futuretech II Acquisition has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Futuretech go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Futuretech

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 11.82 times more return on investment than Futuretech. However, Scandinavian Tobacco is 11.82 times more volatile than Futuretech II Acquisition. It trades about 0.03 of its potential returns per unit of risk. Futuretech II Acquisition is currently generating about 0.04 per unit of risk. If you would invest  1,949  in Scandinavian Tobacco Group on October 24, 2024 and sell it today you would lose (570.00) from holding Scandinavian Tobacco Group or give up 29.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.42%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  Futuretech II Acquisition

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. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Futuretech II Acquisition

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Futuretech II Acquisition are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady forward indicators, Futuretech may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Scandinavian Tobacco and Futuretech

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

The idea behind Scandinavian Tobacco Group and Futuretech II Acquisition 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 CEOs Directory module to screen CEOs from public companies around the world.