Correlation Between Scandinavian Tobacco and TORM Plc
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and TORM Plc 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 TORM Plc 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 TORM plc, you can compare the effects of market volatilities on Scandinavian Tobacco and TORM Plc 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 TORM Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and TORM Plc.
Diversification Opportunities for Scandinavian Tobacco and TORM Plc
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Scandinavian and TORM is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and TORM plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TORM plc 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 TORM Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TORM plc has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and TORM Plc go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and TORM Plc
Assuming the 90 days trading horizon Scandinavian Tobacco Group is expected to generate 1.1 times more return on investment than TORM Plc. However, Scandinavian Tobacco is 1.1 times more volatile than TORM plc. It trades about -0.16 of its potential returns per unit of risk. TORM plc is currently generating about -0.42 per unit of risk. If you would invest 10,300 in Scandinavian Tobacco Group on September 1, 2024 and sell it today you would lose (800.00) from holding Scandinavian Tobacco Group or give up 7.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. TORM plc
Performance |
| Timeline |
| Scandinavian Tobacco |
| TORM plc |
Scandinavian Tobacco and TORM Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and TORM Plc
The main advantage of trading using opposite Scandinavian Tobacco and TORM Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, TORM Plc 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 TORM Plc will offset losses from the drop in TORM Plc's long position.| Scandinavian Tobacco vs. Matas AS | Scandinavian Tobacco vs. Tryg AS | Scandinavian Tobacco vs. Alm Brand | Scandinavian Tobacco vs. Royal Unibrew AS |
| TORM Plc vs. Danske Bank AS | TORM Plc vs. DSV Panalpina AS | TORM Plc vs. AP Mller | TORM Plc vs. Vestas Wind Systems |
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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |