Correlation Between Scandinavian Tobacco and RBC Bearings
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and RBC Bearings 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 RBC Bearings 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 RBC Bearings Incorporated, you can compare the effects of market volatilities on Scandinavian Tobacco and RBC Bearings 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 RBC Bearings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and RBC Bearings.
Diversification Opportunities for Scandinavian Tobacco and RBC Bearings
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Scandinavian and RBC is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and RBC Bearings Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Bearings 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 RBC Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Bearings has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and RBC Bearings go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and RBC Bearings
Assuming the 90 days horizon Scandinavian Tobacco is expected to generate 2.02 times less return on investment than RBC Bearings. But when comparing it to its historical volatility, Scandinavian Tobacco Group is 1.03 times less risky than RBC Bearings. It trades about 0.03 of its potential returns per unit of risk. RBC Bearings Incorporated is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 20,906 in RBC Bearings Incorporated on September 24, 2024 and sell it today you would earn a total of 9,722 from holding RBC Bearings Incorporated or generate 46.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. RBC Bearings Incorporated
Performance |
| Timeline |
| Scandinavian Tobacco |
| RBC Bearings |
Scandinavian Tobacco and RBC Bearings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and RBC Bearings
The main advantage of trading using opposite Scandinavian Tobacco and RBC Bearings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, RBC Bearings 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 RBC Bearings will offset losses from the drop in RBC Bearings' long position.| Scandinavian Tobacco vs. Universal | Scandinavian Tobacco vs. Imperial Brands PLC | Scandinavian Tobacco vs. Japan Tobacco ADR | Scandinavian Tobacco vs. Philip Morris International |
| RBC Bearings vs. Lincoln Electric Holdings | RBC Bearings vs. Toro Co | RBC Bearings vs. Timken Company | RBC Bearings vs. Eastern Co |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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