Correlation Between Scandinavian Tobacco and Nordinvestments

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

Diversification Opportunities for Scandinavian Tobacco and Nordinvestments

0.0

Correlation Coefficient

Scandinavian Tobacco  Nordinvestments

Pay attention - limited upside

The 3 months correlation between Scandinavian and Nordinvestments is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Nordinvestments AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordinvestments AS 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 Nordinvestments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordinvestments AS has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Nordinvestments go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Nordinvestments

Assuming the 90 days trading horizon Scandinavian Tobacco Group is expected to generate 0.27 times more return on investment than Nordinvestments. However, Scandinavian Tobacco Group is 3.64 times less risky than Nordinvestments. It trades about -0.01 of its potential returns per unit of risk. Nordinvestments AS is currently generating about -0.01 per unit of risk. If you would invest  10,647  in Scandinavian Tobacco Group on October 4, 2024 and sell it today you would lose (1,117) from holding Scandinavian Tobacco Group or give up 10.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  Nordinvestments AS

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

Nordinvestments AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nordinvestments AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Nordinvestments is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Scandinavian Tobacco and Nordinvestments

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

The idea behind Scandinavian Tobacco Group and Nordinvestments AS 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.

Check out your portfolio center.

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.