Correlation Between Scandinavian Tobacco and Smurfit WestRock

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

Diversification Opportunities for Scandinavian Tobacco and Smurfit WestRock

-0.47

Correlation Coefficient

Scandinavian Tobacco  Smurfit WestRock

Very good diversification

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

Pair Corralation between Scandinavian Tobacco and Smurfit WestRock

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 0.47 times more return on investment than Smurfit WestRock. However, Scandinavian Tobacco Group is 2.13 times less risky than Smurfit WestRock. It trades about 0.24 of its potential returns per unit of risk. Smurfit WestRock plc is currently generating about -0.12 per unit of risk. If you would invest  1,345  in Scandinavian Tobacco Group on December 22, 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 Against
Strength	Very Weak
Accuracy	93.75%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  Smurfit WestRock plc

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.

Smurfit WestRock plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smurfit WestRock plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Scandinavian Tobacco and Smurfit WestRock

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

The idea behind Scandinavian Tobacco Group and Smurfit WestRock plc 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.