Correlation Between BRIT AMER and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both BRIT AMER and Scandinavian 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 BRIT AMER and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRIT AMER TOBACCO and Scandinavian Tobacco Group, you can compare the effects of market volatilities on BRIT AMER and Scandinavian 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 BRIT AMER with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRIT AMER and Scandinavian Tobacco.
Diversification Opportunities for BRIT AMER and Scandinavian Tobacco
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BRIT and Scandinavian is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and BRIT AMER 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 BRIT AMER TOBACCO are associated (or correlated) with Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of BRIT AMER i.e., BRIT AMER and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between BRIT AMER and Scandinavian Tobacco
Assuming the 90 days trading horizon BRIT AMER TOBACCO is expected to generate 0.58 times more return on investment than Scandinavian Tobacco. However, BRIT AMER TOBACCO is 1.74 times less risky than Scandinavian Tobacco. It trades about 0.33 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.06 per unit of risk. If you would invest 3,222 in BRIT AMER TOBACCO on August 30, 2024 and sell it today you would earn a total of 351.00 from holding BRIT AMER TOBACCO or generate 10.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRIT AMER TOBACCO vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| BRIT AMER TOBACCO |
| Scandinavian Tobacco |
BRIT AMER and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRIT AMER and Scandinavian Tobacco
The main advantage of trading using opposite BRIT AMER and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRIT AMER position performs unexpectedly, Scandinavian 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 Scandinavian Tobacco will offset losses from the drop in Scandinavian Tobacco's long position.| BRIT AMER vs. Apple Inc | BRIT AMER vs. Apple Inc | BRIT AMER vs. Superior Plus Corp | BRIT AMER vs. SIVERS SEMICONDUCTORS AB |
| Scandinavian Tobacco vs. Superior Plus Corp | Scandinavian Tobacco vs. NMI Holdings | Scandinavian Tobacco vs. SIVERS SEMICONDUCTORS AB | Scandinavian Tobacco vs. Talanx AG |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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