Correlation Between Major Drilling and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Major Drilling 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 Major Drilling and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Major Drilling Group and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Major Drilling 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 Major Drilling with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Major Drilling and Scandinavian Tobacco.
Diversification Opportunities for Major Drilling and Scandinavian Tobacco
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Major and Scandinavian is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Major Drilling Group and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Major Drilling 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 Major Drilling Group 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 Major Drilling i.e., Major Drilling and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Major Drilling and Scandinavian Tobacco
Assuming the 90 days horizon Major Drilling Group is expected to generate 1.33 times more return on investment than Scandinavian Tobacco. However, Major Drilling is 1.33 times more volatile than Scandinavian Tobacco Group. It trades about 0.05 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.1 per unit of risk. If you would invest 565.00 in Major Drilling Group on September 20, 2024 and sell it today you would earn a total of 10.00 from holding Major Drilling Group or generate 1.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Major Drilling Group vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Major Drilling Group |
| Scandinavian Tobacco |
Major Drilling and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Major Drilling and Scandinavian Tobacco
The main advantage of trading using opposite Major Drilling and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Major Drilling 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.| Major Drilling vs. BHP Group Limited | Major Drilling vs. Vale SA | Major Drilling vs. Superior Plus Corp | Major Drilling vs. SIVERS SEMICONDUCTORS AB |
| Scandinavian Tobacco vs. Regions Financial | Scandinavian Tobacco vs. PT Bank Maybank | Scandinavian Tobacco vs. CHIBA BANK | Scandinavian Tobacco vs. Tradegate AG Wertpapierhandelsbank |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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