Correlation Between Scandinavian Tobacco and RELIANCE

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

Diversification Opportunities for Scandinavian Tobacco and RELIANCE

-0.23

Correlation Coefficient

Scandinavian Tobacco  RELIANCE

Very good diversification

The 3 months correlation between Scandinavian and RELIANCE is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and RELIANCE STL ALUM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELIANCE STL ALUM 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 RELIANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RELIANCE STL ALUM has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and RELIANCE go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and RELIANCE

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 0.36 times more return on investment than RELIANCE. However, Scandinavian Tobacco Group is 2.79 times less risky than RELIANCE. It trades about -0.21 of its potential returns per unit of risk. RELIANCE STL ALUM is currently generating about -0.61 per unit of risk. If you would invest  716.00  in Scandinavian Tobacco Group on October 3, 2024 and sell it today you would lose (32.00) from holding Scandinavian Tobacco Group or give up 4.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	22.73%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  RELIANCE STL ALUM

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

RELIANCE STL ALUM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RELIANCE STL ALUM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for RELIANCE STL ALUM investors.

Pair Trading with Scandinavian Tobacco and RELIANCE

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

The idea behind Scandinavian Tobacco Group and RELIANCE STL ALUM 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.