Correlation Between Scandinavian Tobacco and Emerson Electric
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Emerson Electric 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 Emerson Electric 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 Emerson Electric, you can compare the effects of market volatilities on Scandinavian Tobacco and Emerson Electric 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 Emerson Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Emerson Electric.
Diversification Opportunities for Scandinavian Tobacco and Emerson Electric
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Scandinavian and Emerson is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Emerson Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Electric 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 Emerson Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Electric has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Emerson Electric go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Emerson Electric
Assuming the 90 days horizon Scandinavian Tobacco Group is expected to under-perform the Emerson Electric. But the pink sheet apears to be less risky and, when comparing its historical volatility, Scandinavian Tobacco Group is 1.93 times less risky than Emerson Electric. The pink sheet trades about -0.29 of its potential returns per unit of risk. The Emerson Electric is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 10,936 in Emerson Electric on September 4, 2024 and sell it today you would earn a total of 2,441 from holding Emerson Electric or generate 22.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. Emerson Electric
Performance |
| Timeline |
| Scandinavian Tobacco |
| Emerson Electric |
Scandinavian Tobacco and Emerson Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and Emerson Electric
The main advantage of trading using opposite Scandinavian Tobacco and Emerson Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Emerson Electric 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 Emerson Electric will offset losses from the drop in Emerson Electric's long position.| Scandinavian Tobacco vs. Universal | Scandinavian Tobacco vs. Imperial Brands PLC | Scandinavian Tobacco vs. Japan Tobacco ADR | Scandinavian Tobacco vs. Philip Morris International |
| Emerson Electric vs. Dover | Emerson Electric vs. Parker Hannifin | Emerson Electric vs. Pentair PLC | Emerson Electric vs. Eaton PLC |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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