Correlation Between Snap and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Scandinavian Tobacco.
Diversification Opportunities for Snap and Scandinavian Tobacco
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Snap and Scandinavian is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Snap 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 Snap Inc 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 Snap i.e., Snap and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Snap and Scandinavian Tobacco
Given the investment horizon of 90 days Snap Inc is expected to generate 2.91 times more return on investment than Scandinavian Tobacco. However, Snap is 2.91 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 -0.05 per unit of risk. If you would invest 1,298 in Snap Inc on August 25, 2024 and sell it today you would lose (156.00) from holding Snap Inc or give up 12.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Snap Inc vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Snap Inc |
| Scandinavian Tobacco |
Snap and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Scandinavian Tobacco
The main advantage of trading using opposite Snap and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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.The idea behind Snap Inc and Scandinavian Tobacco Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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