Correlation Between Scandinavian Tobacco and Hvidbjerg Bank

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

Diversification Opportunities for Scandinavian Tobacco and Hvidbjerg Bank

0.76

Correlation Coefficient

Scandinavian Tobacco  Hvidbjerg Bank

Poor diversification

The 3 months correlation between Scandinavian and Hvidbjerg is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Hvidbjerg Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hvidbjerg Bank 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 Hvidbjerg Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hvidbjerg Bank has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Hvidbjerg Bank go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Hvidbjerg Bank

Assuming the 90 days trading horizon Scandinavian Tobacco is expected to generate 1.08 times less return on investment than Hvidbjerg Bank. But when comparing it to its historical volatility, Scandinavian Tobacco Group is 1.77 times less risky than Hvidbjerg Bank. It trades about 0.27 of its potential returns per unit of risk. Hvidbjerg Bank is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  11,700  in Hvidbjerg Bank on December 1, 2024 and sell it today you would earn a total of  1,800  from holding Hvidbjerg Bank or generate 15.38% return on investment over 90 days.

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

Scandinavian Tobacco Group  vs.  Hvidbjerg Bank

Scandinavian Tobacco

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Scandinavian Tobacco Group are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Scandinavian Tobacco displayed solid returns over the last few months and may actually be approaching a breakup point.

Hvidbjerg Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hvidbjerg Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Hvidbjerg Bank displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scandinavian Tobacco and Hvidbjerg Bank

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

The idea behind Scandinavian Tobacco Group and Hvidbjerg Bank 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.