Correlation Between Scandinavian Tobacco and Norsk Hydro
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Norsk Hydro 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 Norsk Hydro 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 Norsk Hydro ASA, you can compare the effects of market volatilities on Scandinavian Tobacco and Norsk Hydro 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 Norsk Hydro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Norsk Hydro.
Diversification Opportunities for Scandinavian Tobacco and Norsk Hydro
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Scandinavian and Norsk is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Norsk Hydro ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norsk Hydro ASA 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 Norsk Hydro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norsk Hydro ASA has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Norsk Hydro go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Norsk Hydro
Assuming the 90 days horizon Scandinavian Tobacco Group is expected to under-perform the Norsk Hydro. In addition to that, Scandinavian Tobacco is 1.09 times more volatile than Norsk Hydro ASA. It trades about -0.1 of its total potential returns per unit of risk. Norsk Hydro ASA is currently generating about -0.02 per unit of volatility. If you would invest 570.00 in Norsk Hydro ASA on September 12, 2024 and sell it today you would lose (10.00) from holding Norsk Hydro ASA or give up 1.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. Norsk Hydro ASA
Performance |
| Timeline |
| Scandinavian Tobacco |
| Norsk Hydro ASA |
Scandinavian Tobacco and Norsk Hydro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and Norsk Hydro
The main advantage of trading using opposite Scandinavian Tobacco and Norsk Hydro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Norsk Hydro 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 Norsk Hydro will offset losses from the drop in Norsk Hydro's long position.| Scandinavian Tobacco vs. Daido Steel Co | Scandinavian Tobacco vs. OFFICE DEPOT | Scandinavian Tobacco vs. MAVEN WIRELESS SWEDEN | Scandinavian Tobacco vs. MITSUBISHI STEEL MFG |
| Norsk Hydro vs. Scandinavian Tobacco Group | Norsk Hydro vs. PACIFIC ONLINE | Norsk Hydro vs. Lamar Advertising | Norsk Hydro vs. STRAYER EDUCATION |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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