Correlation Between HE Equipment and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both HE Equipment 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 HE Equipment and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HE Equipment Services and Scandinavian Tobacco Group, you can compare the effects of market volatilities on HE Equipment 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 HE Equipment with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and Scandinavian Tobacco.
Diversification Opportunities for HE Equipment and Scandinavian Tobacco
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HEES and Scandinavian is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and HE Equipment 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 HE Equipment Services 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 HE Equipment i.e., HE Equipment and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between HE Equipment and Scandinavian Tobacco
Given the investment horizon of 90 days HE Equipment Services is expected to generate 2.77 times more return on investment than Scandinavian Tobacco. However, HE Equipment is 2.77 times more volatile than Scandinavian Tobacco Group. It trades about 0.23 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.28 per unit of risk. If you would invest 5,166 in HE Equipment Services on September 2, 2024 and sell it today you would earn a total of 808.00 from holding HE Equipment Services or generate 15.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
HE Equipment Services vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| HE Equipment Services |
| Scandinavian Tobacco |
HE Equipment and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HE Equipment and Scandinavian Tobacco
The main advantage of trading using opposite HE Equipment and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment 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.| HE Equipment vs. GATX Corporation | HE Equipment vs. McGrath RentCorp | HE Equipment vs. Alta Equipment Group | HE Equipment vs. Ryder System |
| Scandinavian Tobacco vs. Universal | Scandinavian Tobacco vs. Imperial Brands PLC | Scandinavian Tobacco vs. Japan Tobacco ADR | Scandinavian Tobacco vs. Philip Morris International |
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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