Correlation Between Scandinavian Tobacco and Associated British
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Associated British 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 Scandinavian Tobacco and Associated British into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scandinavian Tobacco Group and Associated British Foods, you can compare the effects of market volatilities on Scandinavian Tobacco and Associated British 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 Scandinavian Tobacco with a short position of Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Associated British.
Diversification Opportunities for Scandinavian Tobacco and Associated British
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Scandinavian and Associated is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods and Scandinavian Tobacco 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 Scandinavian Tobacco Group are associated (or correlated) with Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Associated British go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Associated British
Assuming the 90 days trading horizon Scandinavian Tobacco Group is expected to under-perform the Associated British. In addition to that, Scandinavian Tobacco is 1.14 times more volatile than Associated British Foods. It trades about 0.0 of its total potential returns per unit of risk. Associated British Foods is currently generating about 0.06 per unit of volatility. If you would invest 155,429 in Associated British Foods on August 30, 2024 and sell it today you would earn a total of 64,071 from holding Associated British Foods or generate 41.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. Associated British Foods
Performance |
| Timeline |
| Scandinavian Tobacco |
| Associated British Foods |
Scandinavian Tobacco and Associated British Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and Associated British
The main advantage of trading using opposite Scandinavian Tobacco and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.| Scandinavian Tobacco vs. Lendinvest PLC | Scandinavian Tobacco vs. Neometals | Scandinavian Tobacco vs. Albion Technology General | Scandinavian Tobacco vs. Jupiter Fund Management |
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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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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