Correlation Between London Security and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both London Security 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 London Security and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between London Security Plc and Scandinavian Tobacco Group, you can compare the effects of market volatilities on London Security 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 London Security with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of London Security and Scandinavian Tobacco.
Diversification Opportunities for London Security and Scandinavian Tobacco
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between London and Scandinavian is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and London Security 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 London Security Plc 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 London Security i.e., London Security and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between London Security and Scandinavian Tobacco
Assuming the 90 days trading horizon London Security is expected to generate 163.56 times less return on investment than Scandinavian Tobacco. But when comparing it to its historical volatility, London Security Plc is 1.38 times less risky than Scandinavian Tobacco. It trades about 0.0 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 10,300 in Scandinavian Tobacco Group on November 29, 2024 and sell it today you would earn a total of 680.00 from holding Scandinavian Tobacco Group or generate 6.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
London Security Plc vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| London Security Plc |
| Scandinavian Tobacco |
London Security and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with London Security and Scandinavian Tobacco
The main advantage of trading using opposite London Security and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security 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.| London Security vs. Monks Investment Trust | London Security vs. Creo Medical Group | London Security vs. Resolute Mining Limited | London Security vs. Silvercorp Metals |
| Scandinavian Tobacco vs. Cornish Metals | Scandinavian Tobacco vs. Universal Health Services | Scandinavian Tobacco vs. Heavitree Brewery | Scandinavian Tobacco vs. MyHealthChecked Plc |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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