Correlation Between Summit Materials and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Summit Materials 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 Summit Materials and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials Cl and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Summit Materials 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 Summit Materials with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Scandinavian Tobacco.
Diversification Opportunities for Summit Materials and Scandinavian Tobacco
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Summit and Scandinavian is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Summit Materials 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 Summit Materials Cl 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 Summit Materials i.e., Summit Materials and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Summit Materials and Scandinavian Tobacco
Assuming the 90 days trading horizon Summit Materials is expected to generate 1.77 times less return on investment than Scandinavian Tobacco. But when comparing it to its historical volatility, Summit Materials Cl is 2.02 times less risky than Scandinavian Tobacco. It trades about 0.27 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 9,517 in Scandinavian Tobacco Group on October 17, 2024 and sell it today you would earn a total of 428.00 from holding Scandinavian Tobacco Group or generate 4.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials Cl vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Summit Materials |
| Scandinavian Tobacco |
Summit Materials and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Scandinavian Tobacco
The main advantage of trading using opposite Summit Materials and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials 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.| Summit Materials vs. Fulcrum Metals PLC | Summit Materials vs. Capital Metals PLC | Summit Materials vs. Future Metals NL | Summit Materials vs. United Utilities Group |
| Scandinavian Tobacco vs. Eastinco Mining Exploration | Scandinavian Tobacco vs. Summit Materials Cl | Scandinavian Tobacco vs. Jacquet Metal Service | Scandinavian Tobacco vs. Metals Exploration 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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