Correlation Between Reliance Industries and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Reliance Industries 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 Reliance Industries and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reliance Industries Ltd and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Reliance Industries 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 Reliance Industries with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Industries and Scandinavian Tobacco.
Diversification Opportunities for Reliance Industries and Scandinavian Tobacco
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Reliance and Scandinavian is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Ltd and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Reliance Industries 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 Reliance Industries Ltd 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 Reliance Industries i.e., Reliance Industries and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Reliance Industries and Scandinavian Tobacco
Assuming the 90 days trading horizon Reliance Industries Ltd is expected to generate 1.35 times more return on investment than Scandinavian Tobacco. However, Reliance Industries is 1.35 times more volatile than Scandinavian Tobacco Group. It trades about -0.08 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.13 per unit of risk. If you would invest 5,920 in Reliance Industries Ltd on September 19, 2024 and sell it today you would lose (130.00) from holding Reliance Industries Ltd or give up 2.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reliance Industries Ltd vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Reliance Industries |
| Scandinavian Tobacco |
Reliance Industries and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reliance Industries and Scandinavian Tobacco
The main advantage of trading using opposite Reliance Industries and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries 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.| Reliance Industries vs. Beowulf Mining | Reliance Industries vs. Roper Technologies | Reliance Industries vs. Caledonia Mining | Reliance Industries vs. DXC Technology Co |
| 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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