Correlation Between Power Metal and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Power Metal 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 Power Metal and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Power Metal Resources and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Power Metal 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 Power Metal with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Metal and Scandinavian Tobacco.
Diversification Opportunities for Power Metal and Scandinavian Tobacco
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Power and Scandinavian is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Power Metal Resources and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Power Metal 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 Power Metal Resources 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 Power Metal i.e., Power Metal and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Power Metal and Scandinavian Tobacco
Assuming the 90 days trading horizon Power Metal Resources is expected to generate 2.55 times more return on investment than Scandinavian Tobacco. However, Power Metal is 2.55 times more volatile than Scandinavian Tobacco Group. It trades about 0.02 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.12 per unit of risk. If you would invest 1,389 in Power Metal Resources on September 19, 2024 and sell it today you would earn a total of 11.00 from holding Power Metal Resources or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Power Metal Resources vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Power Metal Resources |
| Scandinavian Tobacco |
Power Metal and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Power Metal and Scandinavian Tobacco
The main advantage of trading using opposite Power Metal and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Metal 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.| Power Metal vs. Take Two Interactive Software | Power Metal vs. Pfeiffer Vacuum Technology | Power Metal vs. Gruppo MutuiOnline SpA | Power Metal vs. Microchip Technology |
| Scandinavian Tobacco vs. Samsung Electronics Co | Scandinavian Tobacco vs. Samsung Electronics Co | Scandinavian Tobacco vs. Hyundai Motor | Scandinavian Tobacco vs. Reliance Industries Ltd |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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