Correlation Between Scandinavian Tobacco and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Japan 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 Scandinavian Tobacco and Japan Tobacco 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 Japan Tobacco, you can compare the effects of market volatilities on Scandinavian Tobacco and Japan 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 Scandinavian Tobacco with a short position of Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Japan Tobacco.
Diversification Opportunities for Scandinavian Tobacco and Japan Tobacco
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Scandinavian and Japan is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Japan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco 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 Japan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Tobacco has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Japan Tobacco go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Japan Tobacco
Assuming the 90 days horizon Scandinavian Tobacco is expected to generate 2.47 times less return on investment than Japan Tobacco. But when comparing it to its historical volatility, Scandinavian Tobacco Group is 1.14 times less risky than Japan Tobacco. It trades about 0.0 of its potential returns per unit of risk. Japan Tobacco is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,639 in Japan Tobacco on September 1, 2024 and sell it today you would lose (3.00) from holding Japan Tobacco or give up 0.11% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. Japan Tobacco
Performance |
| Timeline |
| Scandinavian Tobacco |
| Japan Tobacco |
Scandinavian Tobacco and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and Japan Tobacco
The main advantage of trading using opposite Scandinavian Tobacco and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Japan 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 Japan Tobacco will offset losses from the drop in Japan Tobacco's long position.| Scandinavian Tobacco vs. Darden Restaurants | Scandinavian Tobacco vs. Hanison Construction Holdings | Scandinavian Tobacco vs. NorAm Drilling AS | Scandinavian Tobacco vs. BORR DRILLING NEW |
| Japan Tobacco vs. Performance Food Group | Japan Tobacco vs. JJ SNACK FOODS | Japan Tobacco vs. MUTUIONLINE | Japan Tobacco vs. LIFEWAY FOODS |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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