Correlation Between Scandinavian Tobacco and Dairy Farm
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Dairy Farm 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 Dairy Farm 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 Dairy Farm International, you can compare the effects of market volatilities on Scandinavian Tobacco and Dairy Farm 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 Dairy Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Dairy Farm.
Diversification Opportunities for Scandinavian Tobacco and Dairy Farm
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Scandinavian and Dairy is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Dairy Farm International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dairy Farm International 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 Dairy Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dairy Farm International has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Dairy Farm go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Dairy Farm
Assuming the 90 days horizon Scandinavian Tobacco is expected to generate 2.0 times less return on investment than Dairy Farm. But when comparing it to its historical volatility, Scandinavian Tobacco Group is 1.09 times less risky than Dairy Farm. It trades about 0.01 of its potential returns per unit of risk. Dairy Farm International is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 216.00 in Dairy Farm International on November 8, 2024 and sell it today you would earn a total of 2.00 from holding Dairy Farm International or generate 0.93% 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. Dairy Farm International
Performance |
| Timeline |
| Scandinavian Tobacco |
| Dairy Farm International |
Scandinavian Tobacco and Dairy Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and Dairy Farm
The main advantage of trading using opposite Scandinavian Tobacco and Dairy Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Dairy Farm 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 Dairy Farm will offset losses from the drop in Dairy Farm's long position.| Scandinavian Tobacco vs. Sanyo Chemical Industries | Scandinavian Tobacco vs. ARDAGH METAL PACDL 0001 | Scandinavian Tobacco vs. FIREWEED METALS P | Scandinavian Tobacco vs. KINGBOARD CHEMICAL |
| Dairy Farm vs. BRIT AMER TOBACCO | Dairy Farm vs. Summit Hotel Properties | Dairy Farm vs. Penn National Gaming | Dairy Farm vs. DETALION GAMES SA |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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