Correlation Between Scandinavian Tobacco and Shui On

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

Diversification Opportunities for Scandinavian Tobacco and Shui On

-0.29

Correlation Coefficient

Scandinavian Tobacco  Shui On

Very good diversification

The 3 months correlation between Scandinavian and Shui is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Shui On Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shui On Land 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 Shui On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shui On Land has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Shui On go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Shui On

Assuming the 90 days horizon Scandinavian Tobacco is expected to generate 31.91 times less return on investment than Shui On. But when comparing it to its historical volatility, Scandinavian Tobacco Group is 14.85 times less risky than Shui On. It trades about 0.03 of its potential returns per unit of risk. Shui On Land is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Shui On Land on September 30, 2024 and sell it today you would lose (6.00) from holding Shui On Land or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	29.06%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  Shui On Land

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.

Shui On Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shui On Land has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Shui On is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Scandinavian Tobacco and Shui On

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

The idea behind Scandinavian Tobacco Group and Shui On Land 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.