Correlation Between Scandinavian Tobacco and RLX Technology

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

Diversification Opportunities for Scandinavian Tobacco and RLX Technology

0.47

Correlation Coefficient

Scandinavian Tobacco  RLX Technology

Very weak diversification

The 3 months correlation between Scandinavian and RLX is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and RLX Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RLX Technology 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 RLX Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RLX Technology has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and RLX Technology go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and RLX Technology

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 0.33 times more return on investment than RLX Technology. However, Scandinavian Tobacco Group is 3.01 times less risky than RLX Technology. It trades about 0.24 of its potential returns per unit of risk. RLX Technology is currently generating about 0.01 per unit of risk. If you would invest  1,345  in Scandinavian Tobacco Group on December 21, 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	Weak
Accuracy	95.24%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  RLX Technology

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.

RLX Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days RLX Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, RLX Technology is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Scandinavian Tobacco and RLX Technology

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

The idea behind Scandinavian Tobacco Group and RLX Technology 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.