Correlation Between ALLSTATE and Scandinavian Tobacco

Can any of the company-specific risk be diversified away by investing in both ALLSTATE and Scandinavian Tobacco 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 ALLSTATE and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ALLSTATE P 45 and Scandinavian Tobacco Group, you can compare the effects of market volatilities on ALLSTATE and Scandinavian Tobacco 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 ALLSTATE with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of ALLSTATE and Scandinavian Tobacco.

Diversification Opportunities for ALLSTATE and Scandinavian Tobacco

-0.35

Correlation Coefficient

ALLSTATE  Scandinavian Tobacco

Very good diversification

The 3 months correlation between ALLSTATE and Scandinavian is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding ALLSTATE P 45 and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and ALLSTATE 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 ALLSTATE P 45 are associated (or correlated) with Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of ALLSTATE i.e., ALLSTATE and Scandinavian Tobacco go up and down completely randomly.

Pair Corralation between ALLSTATE and Scandinavian Tobacco

Assuming the 90 days trading horizon ALLSTATE P 45 is expected to under-perform the Scandinavian Tobacco. In addition to that, ALLSTATE is 1.58 times more volatile than Scandinavian Tobacco Group. It trades about -0.16 of its total potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.24 per unit of volatility. If you would invest  1,345  in Scandinavian Tobacco Group on December 28, 2024 and sell it today you would earn a total of  240.00  from holding Scandinavian Tobacco Group or generate 17.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	68.25%
Values	Daily Returns

ALLSTATE P 45  vs.  Scandinavian Tobacco Group

ALLSTATE P 45

Risk-Adjusted Performance

OK

Over the last 90 days ALLSTATE P 45 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for ALLSTATE P 45 investors.

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 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Scandinavian Tobacco reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ALLSTATE and Scandinavian Tobacco

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

The idea behind ALLSTATE P 45 and Scandinavian Tobacco 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 CEOs Directory module to screen CEOs from public companies around the world.