Correlation Between British American and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Scandinavian Tobacco Group, you can compare the effects of market volatilities on British American 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 British American with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Scandinavian Tobacco.
Diversification Opportunities for British American and Scandinavian Tobacco
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between British and Scandinavian is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and British American 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 British American Tobacco 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 British American i.e., British American and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between British American and Scandinavian Tobacco
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.89 times more return on investment than Scandinavian Tobacco. However, British American Tobacco is 1.12 times less risky than Scandinavian Tobacco. It trades about 0.1 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.13 per unit of risk. If you would invest 3,666 in British American Tobacco on September 19, 2024 and sell it today you would earn a total of 61.00 from holding British American Tobacco or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
British American Tobacco vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| British American Tobacco |
| Scandinavian Tobacco |
British American and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Scandinavian Tobacco
The main advantage of trading using opposite British American and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.| British American vs. Ocean Harvest Technology | British American vs. Allianz Technology Trust | British American vs. Auction Technology Group | British American vs. Cognizant Technology Solutions |
| Scandinavian Tobacco vs. Samsung Electronics Co | Scandinavian Tobacco vs. Samsung Electronics Co | Scandinavian Tobacco vs. Hyundai Motor | Scandinavian Tobacco vs. Reliance Industries Ltd |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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