Correlation Between Prime Office and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Prime Office 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 Prime Office and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prime Office AS and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Prime Office 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 Prime Office with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prime Office and Scandinavian Tobacco.
Diversification Opportunities for Prime Office and Scandinavian Tobacco
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Prime and Scandinavian is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Prime Office AS and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Prime Office 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 Prime Office AS 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 Prime Office i.e., Prime Office and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Prime Office and Scandinavian Tobacco
Assuming the 90 days trading horizon Prime Office AS is expected to generate 1.47 times more return on investment than Scandinavian Tobacco. However, Prime Office is 1.47 times more volatile than Scandinavian Tobacco Group. It trades about -0.01 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.02 per unit of risk. If you would invest 21,931 in Prime Office AS on September 4, 2024 and sell it today you would lose (4,031) from holding Prime Office AS or give up 18.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prime Office AS vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Prime Office AS |
| Scandinavian Tobacco |
Prime Office and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prime Office and Scandinavian Tobacco
The main advantage of trading using opposite Prime Office and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prime Office 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.| Prime Office vs. Djurslands Bank | Prime Office vs. North Media AS | Prime Office vs. First Farms AS | Prime Office vs. Flgger group AS |
| 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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