Correlation Between Westrock Coffee and Scandinavian Tobacco

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

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

Diversification Opportunities for Westrock Coffee and Scandinavian Tobacco

-0.42

Correlation Coefficient

Westrock Coffee  Scandinavian Tobacco

Very good diversification

The 3 months correlation between Westrock and Scandinavian is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Westrock Coffee 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 Westrock Coffee 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 Westrock Coffee i.e., Westrock Coffee and Scandinavian Tobacco go up and down completely randomly.

Pair Corralation between Westrock Coffee and Scandinavian Tobacco

Given the investment horizon of 90 days Westrock Coffee is expected to under-perform the Scandinavian Tobacco. In addition to that, Westrock Coffee is 3.82 times more volatile than Scandinavian Tobacco Group. It trades about -0.34 of its total potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.21 per unit of volatility. If you would invest  716.00  in Scandinavian Tobacco Group on October 3, 2024 and sell it today you would lose (32.00) from holding Scandinavian Tobacco Group or give up 4.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Westrock Coffee  vs.  Scandinavian Tobacco Group

Westrock Coffee

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Westrock Coffee are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Westrock Coffee is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Westrock Coffee and Scandinavian Tobacco

The main advantage of trading using opposite Westrock Coffee and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westrock Coffee 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 Westrock Coffee 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.