Correlation Between Scandinavian Tobacco and Lollands Bank
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and Lollands Bank 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 Lollands Bank 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 Lollands Bank, you can compare the effects of market volatilities on Scandinavian Tobacco and Lollands Bank 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 Lollands Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and Lollands Bank.
Diversification Opportunities for Scandinavian Tobacco and Lollands Bank
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Scandinavian and Lollands is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Lollands Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lollands Bank 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 Lollands Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lollands Bank has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Lollands Bank go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and Lollands Bank
Assuming the 90 days trading horizon Scandinavian Tobacco Group is expected to under-perform the Lollands Bank. In addition to that, Scandinavian Tobacco is 1.03 times more volatile than Lollands Bank. It trades about -0.06 of its total potential returns per unit of risk. Lollands Bank is currently generating about -0.01 per unit of volatility. If you would invest 58,000 in Lollands Bank on August 29, 2024 and sell it today you would lose (3,000) from holding Lollands Bank or give up 5.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. Lollands Bank
Performance |
| Timeline |
| Scandinavian Tobacco |
| Lollands Bank |
Scandinavian Tobacco and Lollands Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and Lollands Bank
The main advantage of trading using opposite Scandinavian Tobacco and Lollands Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, Lollands Bank 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 Lollands Bank will offset losses from the drop in Lollands Bank's long position.| Scandinavian Tobacco vs. Matas AS | Scandinavian Tobacco vs. Tryg AS | Scandinavian Tobacco vs. Alm Brand | Scandinavian Tobacco vs. Royal Unibrew AS |
| Lollands Bank vs. Skjern Bank AS | Lollands Bank vs. Kreditbanken AS | Lollands Bank vs. Djurslands Bank | Lollands Bank vs. Groenlandsbanken 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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