Correlation Between Dow Jones and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Scandinavian Tobacco.
Diversification Opportunities for Dow Jones and Scandinavian Tobacco
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Scandinavian is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Dow Jones and Scandinavian Tobacco
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.46 times more return on investment than Scandinavian Tobacco. However, Dow Jones Industrial is 2.16 times less risky than Scandinavian Tobacco. It trades about 0.13 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.05 per unit of risk. If you would invest 3,543,042 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 886,609 from holding Dow Jones Industrial or generate 25.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Dow Jones Industrial vs. Scandinavian Tobacco Group
Performance |
| Timeline |
Dow Jones and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Scandinavian Tobacco Group
Pair trading matchups for Scandinavian Tobacco
Pair Trading with Dow Jones and Scandinavian Tobacco
The main advantage of trading using opposite Dow Jones and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
| Scandinavian Tobacco vs. Matas AS | Scandinavian Tobacco vs. Tryg AS | Scandinavian Tobacco vs. Alm Brand | Scandinavian Tobacco vs. Royal Unibrew AS |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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