Correlation Between Scandinavian Tobacco and Wise Plc
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Wise Plc 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 Wise Plc 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 Wise plc, you can compare the effects of market volatilities on Scandinavian Tobacco and Wise Plc 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 Wise Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Wise Plc.
Diversification Opportunities for Scandinavian Tobacco and Wise Plc
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Scandinavian and Wise is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Wise plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wise 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 Wise Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wise plc has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Wise Plc go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Wise Plc
Assuming the 90 days trading horizon Scandinavian Tobacco is expected to generate 28.93 times less return on investment than Wise Plc. But when comparing it to its historical volatility, Scandinavian Tobacco Group is 1.55 times less risky than Wise Plc. It trades about 0.0 of its potential returns per unit of risk. Wise plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 52,740 in Wise plc on October 13, 2024 and sell it today you would earn a total of 55,660 from holding Wise plc or generate 105.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. Wise plc
Performance |
| Timeline |
| Scandinavian Tobacco |
| Wise plc |
Scandinavian Tobacco and Wise Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and Wise Plc
The main advantage of trading using opposite Scandinavian Tobacco and Wise Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Wise Plc 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 Wise Plc will offset losses from the drop in Wise Plc's long position.The idea behind Scandinavian Tobacco Group and Wise plc 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.
| Wise Plc vs. Scandinavian Tobacco Group | Wise Plc vs. Taiwan Semiconductor Manufacturing | Wise Plc vs. Inspiration Healthcare Group | Wise Plc vs. Compagnie Plastic Omnium |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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