Correlation Between Reckitt Benckiser and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Reckitt Benckiser 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 Reckitt Benckiser and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reckitt Benckiser Group and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Reckitt Benckiser 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 Reckitt Benckiser with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reckitt Benckiser and Scandinavian Tobacco.
Diversification Opportunities for Reckitt Benckiser and Scandinavian Tobacco
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Reckitt and Scandinavian is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Reckitt Benckiser Group and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Reckitt Benckiser 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 Reckitt Benckiser Group 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 Reckitt Benckiser i.e., Reckitt Benckiser and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Reckitt Benckiser and Scandinavian Tobacco
Assuming the 90 days trading horizon Reckitt Benckiser is expected to generate 1.06 times less return on investment than Scandinavian Tobacco. But when comparing it to its historical volatility, Reckitt Benckiser Group is 1.13 times less risky than Scandinavian Tobacco. It trades about 0.11 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 9,624 in Scandinavian Tobacco Group on October 9, 2024 and sell it today you would earn a total of 151.00 from holding Scandinavian Tobacco Group or generate 1.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reckitt Benckiser Group vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Reckitt Benckiser |
| Scandinavian Tobacco |
Reckitt Benckiser and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reckitt Benckiser and Scandinavian Tobacco
The main advantage of trading using opposite Reckitt Benckiser and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reckitt Benckiser 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.| Reckitt Benckiser vs. Batm Advanced Communications | Reckitt Benckiser vs. Spirent Communications plc | Reckitt Benckiser vs. Gamma Communications PLC | Reckitt Benckiser vs. Telecom Italia SpA |
| Scandinavian Tobacco vs. Porvair plc | Scandinavian Tobacco vs. International Biotechnology Trust | Scandinavian Tobacco vs. Science in Sport | Scandinavian Tobacco vs. Amedeo Air Four |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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