Correlation Between Alliance Data and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Alliance Data 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 Alliance Data and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliance Data Systems and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Alliance Data 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 Alliance Data with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and Scandinavian Tobacco.
Diversification Opportunities for Alliance Data and Scandinavian Tobacco
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alliance and Scandinavian is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Alliance Data 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 Alliance Data Systems 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 Alliance Data i.e., Alliance Data and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Alliance Data and Scandinavian Tobacco
Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 2.3 times more return on investment than Scandinavian Tobacco. However, Alliance Data is 2.3 times more volatile than Scandinavian Tobacco Group. It trades about 0.17 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.08 per unit of risk. If you would invest 5,027 in Alliance Data Systems on August 30, 2024 and sell it today you would earn a total of 752.00 from holding Alliance Data Systems or generate 14.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alliance Data Systems vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Alliance Data Systems |
| Scandinavian Tobacco |
Alliance Data and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alliance Data and Scandinavian Tobacco
The main advantage of trading using opposite Alliance Data and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data 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.| Alliance Data vs. Tungsten West PLC | Alliance Data vs. Argo Group Limited | Alliance Data vs. Hardide PLC | Alliance Data vs. Versarien PLC |
| Scandinavian Tobacco vs. Verizon Communications | Scandinavian Tobacco vs. Brunner Investment Trust | Scandinavian Tobacco vs. Gaztransport et Technigaz | Scandinavian Tobacco vs. Zegona Communications Plc |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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