Correlation Between Daido Steel and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Daido Steel 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 Daido Steel and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daido Steel Co and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Daido Steel 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 Daido Steel with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daido Steel and Scandinavian Tobacco.
Diversification Opportunities for Daido Steel and Scandinavian Tobacco
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Daido and Scandinavian is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Daido Steel Co and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Daido Steel 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 Daido Steel Co 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 Daido Steel i.e., Daido Steel and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Daido Steel and Scandinavian Tobacco
Assuming the 90 days horizon Daido Steel Co is expected to under-perform the Scandinavian Tobacco. In addition to that, Daido Steel is 1.34 times more volatile than Scandinavian Tobacco Group. It trades about -0.06 of its total potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.01 per unit of volatility. If you would invest 1,260 in Scandinavian Tobacco Group on September 13, 2024 and sell it today you would earn a total of 10.00 from holding Scandinavian Tobacco Group or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Daido Steel Co vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Daido Steel |
| Scandinavian Tobacco |
Daido Steel and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daido Steel and Scandinavian Tobacco
The main advantage of trading using opposite Daido Steel and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daido Steel 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.| Daido Steel vs. ArcelorMittal | Daido Steel vs. NIPPON STEEL SPADR | Daido Steel vs. Reliance Steel Aluminum | Daido Steel vs. Superior Plus Corp |
| Scandinavian Tobacco vs. HomeToGo SE | Scandinavian Tobacco vs. Gruppo Mutuionline SpA | Scandinavian Tobacco vs. SIEM OFFSHORE NEW | Scandinavian Tobacco vs. Taylor Morrison Home |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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