Correlation Between Scandinavian Tobacco and Sensient Technologies
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Sensient Technologies 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 Sensient Technologies 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 Sensient Technologies, you can compare the effects of market volatilities on Scandinavian Tobacco and Sensient Technologies 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 Sensient Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Sensient Technologies.
Diversification Opportunities for Scandinavian Tobacco and Sensient Technologies
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Scandinavian and Sensient is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Sensient Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sensient Technologies 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 Sensient Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sensient Technologies has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Sensient Technologies go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Sensient Technologies
Assuming the 90 days horizon Scandinavian Tobacco Group is expected to under-perform the Sensient Technologies. But the pink sheet apears to be less risky and, when comparing its historical volatility, Scandinavian Tobacco Group is 1.54 times less risky than Sensient Technologies. The pink sheet trades about -0.28 of its potential returns per unit of risk. The Sensient Technologies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 7,507 in Sensient Technologies on September 1, 2024 and sell it today you would earn a total of 257.00 from holding Sensient Technologies or generate 3.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. Sensient Technologies
Performance |
| Timeline |
| Scandinavian Tobacco |
| Sensient Technologies |
Scandinavian Tobacco and Sensient Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and Sensient Technologies
The main advantage of trading using opposite Scandinavian Tobacco and Sensient Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Sensient Technologies 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 Sensient Technologies will offset losses from the drop in Sensient Technologies' long position.| Scandinavian Tobacco vs. Universal | Scandinavian Tobacco vs. Imperial Brands PLC | Scandinavian Tobacco vs. Japan Tobacco ADR | Scandinavian Tobacco vs. Philip Morris International |
| Sensient Technologies vs. Innospec | Sensient Technologies vs. Minerals Technologies | Sensient Technologies vs. Oil Dri | Sensient Technologies vs. H B Fuller |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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