Correlation Between Scandinavian Tobacco and Premier Foods
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Premier Foods 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 Premier Foods 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 Premier Foods PLC, you can compare the effects of market volatilities on Scandinavian Tobacco and Premier Foods 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 Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Premier Foods.
Diversification Opportunities for Scandinavian Tobacco and Premier Foods
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Scandinavian and Premier is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Premier Foods PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods PLC 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 Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods PLC has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Premier Foods go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Premier Foods
Assuming the 90 days trading horizon Scandinavian Tobacco Group is expected to under-perform the Premier Foods. In addition to that, Scandinavian Tobacco is 1.43 times more volatile than Premier Foods PLC. It trades about -0.08 of its total potential returns per unit of risk. Premier Foods PLC is currently generating about 0.05 per unit of volatility. If you would invest 18,940 in Premier Foods PLC on August 30, 2024 and sell it today you would earn a total of 220.00 from holding Premier Foods PLC or generate 1.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. Premier Foods PLC
Performance |
| Timeline |
| Scandinavian Tobacco |
| Premier Foods PLC |
Scandinavian Tobacco and Premier Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and Premier Foods
The main advantage of trading using opposite Scandinavian Tobacco and Premier Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Premier Foods 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 Premier Foods will offset losses from the drop in Premier Foods' 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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