Correlation Between Scandinavian Tobacco and Sabien Technology
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Sabien Technology 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 Sabien Technology 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 Sabien Technology Group, you can compare the effects of market volatilities on Scandinavian Tobacco and Sabien Technology 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 Sabien Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Sabien Technology.
Diversification Opportunities for Scandinavian Tobacco and Sabien Technology
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Scandinavian and Sabien is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Sabien Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabien Technology 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 Sabien Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabien Technology has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Sabien Technology go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Sabien Technology
Assuming the 90 days trading horizon Scandinavian Tobacco is expected to generate 13.59 times less return on investment than Sabien Technology. But when comparing it to its historical volatility, Scandinavian Tobacco Group is 2.46 times less risky than Sabien Technology. It trades about 0.0 of its potential returns per unit of risk. Sabien Technology Group is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,063 in Sabien Technology Group on October 13, 2024 and sell it today you would earn a total of 87.00 from holding Sabien Technology Group or generate 8.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. Sabien Technology Group
Performance |
| Timeline |
| Scandinavian Tobacco |
| Sabien Technology |
Scandinavian Tobacco and Sabien Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and Sabien Technology
The main advantage of trading using opposite Scandinavian Tobacco and Sabien Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Sabien Technology 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 Sabien Technology will offset losses from the drop in Sabien Technology's long position.The idea behind Scandinavian Tobacco Group and Sabien Technology Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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