Correlation Between Scandinavian Tobacco and Universal

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

Diversification Opportunities for Scandinavian Tobacco and Universal

-0.9

Correlation Coefficient

Scandinavian Tobacco  Universal

Pay attention - limited upside

The 3 months correlation between Scandinavian and Universal is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Universal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal 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 Universal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Universal go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Universal

If you would invest  716.00  in Scandinavian Tobacco Group on October 1, 2024 and sell it today you would earn a total of  0.00  from holding Scandinavian Tobacco Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  Universal

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.

Universal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Scandinavian Tobacco and Universal

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

The idea behind Scandinavian Tobacco Group and Universal 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.