Correlation Between Scandinavian Tobacco and International Media

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

Diversification Opportunities for Scandinavian Tobacco and International Media

0.64

Correlation Coefficient

Scandinavian Tobacco  International Media

Poor diversification

The 3 months correlation between Scandinavian and International is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and International Media Acquisitio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Media 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 International Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Media has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and International Media go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and International Media

Assuming the 90 days horizon Scandinavian Tobacco is expected to generate 1.05 times less return on investment than International Media. In addition to that, Scandinavian Tobacco is 1.27 times more volatile than International Media Acquisition. It trades about 0.03 of its total potential returns per unit of risk. International Media Acquisition is currently generating about 0.04 per unit of volatility. If you would invest  1,025  in International Media Acquisition on September 28, 2024 and sell it today you would earn a total of  175.00  from holding International Media Acquisition or generate 17.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	80.68%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  International Media Acquisitio

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. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

International Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days International Media Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, International Media is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Scandinavian Tobacco and International Media

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

The idea behind Scandinavian Tobacco Group and International Media 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.