Correlation Between Nasdaq and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Nasdaq 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 Nasdaq and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Nasdaq 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 Nasdaq with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Scandinavian Tobacco.
Diversification Opportunities for Nasdaq and Scandinavian Tobacco
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nasdaq and Scandinavian is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Nasdaq and Scandinavian Tobacco
Assuming the 90 days trading horizon Nasdaq Inc is expected to generate 14.25 times more return on investment than Scandinavian Tobacco. However, Nasdaq is 14.25 times more volatile than Scandinavian Tobacco Group. It trades about 0.07 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.01 per unit of risk. If you would invest 5,852 in Nasdaq Inc on September 13, 2024 and sell it today you would earn a total of 2,244 from holding Nasdaq Inc or generate 38.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Nasdaq Inc vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Nasdaq Inc |
| Scandinavian Tobacco |
Nasdaq and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and Scandinavian Tobacco
The main advantage of trading using opposite Nasdaq and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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.| Nasdaq vs. Check Point Software | Nasdaq vs. Ocean Harvest Technology | Nasdaq vs. Associated British Foods | Nasdaq vs. Public Storage |
| Scandinavian Tobacco vs. Aurora Investment Trust | Scandinavian Tobacco vs. Orient Telecoms | Scandinavian Tobacco vs. Cairo Communication SpA | Scandinavian Tobacco vs. Blackstone Loan Financing |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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