Correlation Between Scandinavian Tobacco and Strategic Education
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Strategic Education 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 Strategic Education 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 Strategic Education, you can compare the effects of market volatilities on Scandinavian Tobacco and Strategic Education 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 Strategic Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Strategic Education.
Diversification Opportunities for Scandinavian Tobacco and Strategic Education
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Scandinavian and Strategic is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Strategic Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Education 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 Strategic Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Education has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Strategic Education go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Strategic Education
Assuming the 90 days horizon Scandinavian Tobacco Group is expected to under-perform the Strategic Education. But the stock apears to be less risky and, when comparing its historical volatility, Scandinavian Tobacco Group is 1.42 times less risky than Strategic Education. The stock trades about -0.11 of its potential returns per unit of risk. The Strategic Education is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 7,900 in Strategic Education on September 1, 2024 and sell it today you would earn a total of 1,450 from holding Strategic Education or generate 18.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. Strategic Education
Performance |
| Timeline |
| Scandinavian Tobacco |
| Strategic Education |
Scandinavian Tobacco and Strategic Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and Strategic Education
The main advantage of trading using opposite Scandinavian Tobacco and Strategic Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Strategic Education 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 Strategic Education will offset losses from the drop in Strategic Education'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 |
| Strategic Education vs. MIRAMAR HOTEL INV | Strategic Education vs. Sunstone Hotel Investors | Strategic Education vs. SEKISUI CHEMICAL | Strategic Education vs. Sumitomo Chemical |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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