Correlation Between FARM 51 and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both FARM 51 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 FARM 51 and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARM 51 GROUP and Scandinavian Tobacco Group, you can compare the effects of market volatilities on FARM 51 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 FARM 51 with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARM 51 and Scandinavian Tobacco.
Diversification Opportunities for FARM 51 and Scandinavian Tobacco
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FARM and Scandinavian is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding FARM 51 GROUP and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and FARM 51 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 FARM 51 GROUP 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 FARM 51 i.e., FARM 51 and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between FARM 51 and Scandinavian Tobacco
Assuming the 90 days horizon FARM 51 GROUP is expected to generate 1.45 times more return on investment than Scandinavian Tobacco. However, FARM 51 is 1.45 times more volatile than Scandinavian Tobacco Group. It trades about 0.07 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.01 per unit of risk. If you would invest 306.00 in FARM 51 GROUP on November 8, 2024 and sell it today you would earn a total of 28.00 from holding FARM 51 GROUP or generate 9.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FARM 51 GROUP vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| FARM 51 GROUP |
| Scandinavian Tobacco |
FARM 51 and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARM 51 and Scandinavian Tobacco
The main advantage of trading using opposite FARM 51 and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARM 51 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.| FARM 51 vs. Spirent Communications plc | FARM 51 vs. GameStop Corp | FARM 51 vs. Telecom Argentina SA | FARM 51 vs. GAMING FAC SA |
| Scandinavian Tobacco vs. Sanyo Chemical Industries | Scandinavian Tobacco vs. ARDAGH METAL PACDL 0001 | Scandinavian Tobacco vs. FIREWEED METALS P | Scandinavian Tobacco vs. KINGBOARD 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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