Correlation Between United Rentals and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both United Rentals and Scandinavian Tobacco 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 United Rentals and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Rentals and Scandinavian Tobacco Group, you can compare the effects of market volatilities on United Rentals and Scandinavian Tobacco 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 United Rentals with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Rentals and Scandinavian Tobacco.
Diversification Opportunities for United Rentals and Scandinavian Tobacco
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between United and Scandinavian is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and United Rentals 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 United Rentals are associated (or correlated) with Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of United Rentals i.e., United Rentals and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between United Rentals and Scandinavian Tobacco
Assuming the 90 days horizon United Rentals is expected to generate 2.84 times less return on investment than Scandinavian Tobacco. But when comparing it to its historical volatility, United Rentals is 2.55 times less risky than Scandinavian Tobacco. It trades about 0.05 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 797.00 in Scandinavian Tobacco Group on November 3, 2024 and sell it today you would earn a total of 561.00 from holding Scandinavian Tobacco Group or generate 70.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Rentals vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| United Rentals |
| Scandinavian Tobacco |
United Rentals and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Rentals and Scandinavian Tobacco
The main advantage of trading using opposite United Rentals and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Rentals position performs unexpectedly, Scandinavian Tobacco 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 Scandinavian Tobacco will offset losses from the drop in Scandinavian Tobacco's long position.| United Rentals vs. TRI CHEMICAL LABORATINC | United Rentals vs. Coffee Holding Co | United Rentals vs. Townsquare Media | United Rentals vs. ETFS Coffee ETC |
| Scandinavian Tobacco vs. Delta Air Lines | Scandinavian Tobacco vs. FORWARD AIR P | Scandinavian Tobacco vs. Nomad Foods | Scandinavian Tobacco vs. LIFEWAY FOODS |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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