Correlation Between Scandinavian Tobacco and Heidelberg Materials
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Heidelberg Materials 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 Heidelberg Materials 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 Heidelberg Materials AG, you can compare the effects of market volatilities on Scandinavian Tobacco and Heidelberg Materials 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 Heidelberg Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Heidelberg Materials.
Diversification Opportunities for Scandinavian Tobacco and Heidelberg Materials
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Scandinavian and Heidelberg is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Heidelberg Materials AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heidelberg Materials 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 Heidelberg Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heidelberg Materials has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Heidelberg Materials go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Heidelberg Materials
Assuming the 90 days horizon Scandinavian Tobacco is expected to generate 1.03 times less return on investment than Heidelberg Materials. In addition to that, Scandinavian Tobacco is 1.2 times more volatile than Heidelberg Materials AG. It trades about 0.07 of its total potential returns per unit of risk. Heidelberg Materials AG is currently generating about 0.08 per unit of volatility. If you would invest 11,760 in Heidelberg Materials AG on October 16, 2024 and sell it today you would earn a total of 500.00 from holding Heidelberg Materials AG or generate 4.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. Heidelberg Materials AG
Performance |
| Timeline |
| Scandinavian Tobacco |
| Heidelberg Materials |
Scandinavian Tobacco and Heidelberg Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and Heidelberg Materials
The main advantage of trading using opposite Scandinavian Tobacco and Heidelberg Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Heidelberg Materials 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 Heidelberg Materials will offset losses from the drop in Heidelberg Materials' long position.| Scandinavian Tobacco vs. Choice Hotels International | Scandinavian Tobacco vs. PPHE HOTEL GROUP | Scandinavian Tobacco vs. DALATA HOTEL | Scandinavian Tobacco vs. Westinghouse Air Brake |
| Heidelberg Materials vs. Scandinavian Tobacco Group | Heidelberg Materials vs. BURLINGTON STORES | Heidelberg Materials vs. Burlington Stores | Heidelberg Materials vs. UNITED RENTALS |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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