Correlation Between Scandinavian Tobacco and Compania Cervecerias
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Compania Cervecerias 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 Scandinavian Tobacco and Compania Cervecerias into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scandinavian Tobacco Group and Compania Cervecerias Unidas, you can compare the effects of market volatilities on Scandinavian Tobacco and Compania Cervecerias 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 Scandinavian Tobacco with a short position of Compania Cervecerias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Compania Cervecerias.
Diversification Opportunities for Scandinavian Tobacco and Compania Cervecerias
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Scandinavian and Compania is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Compania Cervecerias Unidas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Cervecerias and Scandinavian Tobacco 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 Scandinavian Tobacco Group are associated (or correlated) with Compania Cervecerias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Cervecerias has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Compania Cervecerias go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Compania Cervecerias
Assuming the 90 days horizon Scandinavian Tobacco is expected to generate 1.06 times less return on investment than Compania Cervecerias. In addition to that, Scandinavian Tobacco is 1.55 times more volatile than Compania Cervecerias Unidas. It trades about 0.28 of its total potential returns per unit of risk. Compania Cervecerias Unidas is currently generating about 0.45 per unit of volatility. If you would invest 1,151 in Compania Cervecerias Unidas on November 9, 2024 and sell it today you would earn a total of 113.00 from holding Compania Cervecerias Unidas or generate 9.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. Compania Cervecerias Unidas
Performance |
| Timeline |
| Scandinavian Tobacco |
| Compania Cervecerias |
Scandinavian Tobacco and Compania Cervecerias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and Compania Cervecerias
The main advantage of trading using opposite Scandinavian Tobacco and Compania Cervecerias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Compania Cervecerias 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 Compania Cervecerias will offset losses from the drop in Compania Cervecerias' long position.| Scandinavian Tobacco vs. Pyxus International | Scandinavian Tobacco vs. Japan Tobacco ADR | Scandinavian Tobacco vs. Greenlane Holdings |
| Compania Cervecerias vs. Boston Beer | Compania Cervecerias vs. Molson Coors Beverage | Compania Cervecerias vs. Ambev SA ADR | Compania Cervecerias vs. Molson Coors Brewing |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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