Correlation Between Scandinavian Tobacco and Grammer AG
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Grammer AG 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 Grammer AG 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 Grammer AG, you can compare the effects of market volatilities on Scandinavian Tobacco and Grammer AG 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 Grammer AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Grammer AG.
Diversification Opportunities for Scandinavian Tobacco and Grammer AG
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Scandinavian and Grammer is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Grammer AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grammer AG 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 Grammer AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grammer AG has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Grammer AG go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Grammer AG
Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 1.03 times more return on investment than Grammer AG. However, Scandinavian Tobacco is 1.03 times more volatile than Grammer AG. It trades about -0.08 of its potential returns per unit of risk. Grammer AG is currently generating about -0.37 per unit of risk. If you would invest 1,372 in Scandinavian Tobacco Group on August 31, 2024 and sell it today you would lose (70.00) from holding Scandinavian Tobacco Group or give up 5.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. Grammer AG
Performance |
| Timeline |
| Scandinavian Tobacco |
| Grammer AG |
Scandinavian Tobacco and Grammer AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and Grammer AG
The main advantage of trading using opposite Scandinavian Tobacco and Grammer AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Grammer AG 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 Grammer AG will offset losses from the drop in Grammer AG's long position.The idea behind Scandinavian Tobacco Group and Grammer AG 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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