Correlation Between Scandinavian Tobacco and Vector

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

Diversification Opportunities for Scandinavian Tobacco and Vector

-0.04

Correlation Coefficient

Scandinavian Tobacco  Vector

Good diversification

The 3 months correlation between Scandinavian and Vector is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Vector Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vector Group 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 Vector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vector Group has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Vector go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Vector

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to under-perform the Vector. In addition to that, Scandinavian Tobacco is 4.62 times more volatile than Vector Group. It trades about -0.07 of its total potential returns per unit of risk. Vector Group is currently generating about -0.03 per unit of volatility. If you would invest  1,501  in Vector Group on September 2, 2024 and sell it today you would lose (2.00) from holding Vector Group or give up 0.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	40.0%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  Vector Group

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 fairly strong technical and fundamental indicators, Scandinavian Tobacco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Vector Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vector Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Vector is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Scandinavian Tobacco and Vector

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

The idea behind Scandinavian Tobacco Group and Vector Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.