Correlation Between Westinghouse Air and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both Westinghouse Air 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 Westinghouse Air and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westinghouse Air Brake and Scandinavian Tobacco Group, you can compare the effects of market volatilities on Westinghouse Air 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 Westinghouse Air with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westinghouse Air and Scandinavian Tobacco.
Diversification Opportunities for Westinghouse Air and Scandinavian Tobacco
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westinghouse and Scandinavian is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Westinghouse Air Brake and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and Westinghouse Air 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 Westinghouse Air Brake 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 Westinghouse Air i.e., Westinghouse Air and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between Westinghouse Air and Scandinavian Tobacco
Assuming the 90 days horizon Westinghouse Air is expected to generate 1.29 times less return on investment than Scandinavian Tobacco. But when comparing it to its historical volatility, Westinghouse Air Brake is 1.39 times less risky than Scandinavian Tobacco. It trades about 0.08 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,274 in Scandinavian Tobacco Group on October 30, 2024 and sell it today you would earn a total of 48.00 from holding Scandinavian Tobacco Group or generate 3.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westinghouse Air Brake vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| Westinghouse Air Brake |
| Scandinavian Tobacco |
Westinghouse Air and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westinghouse Air and Scandinavian Tobacco
The main advantage of trading using opposite Westinghouse Air and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westinghouse Air 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.| Westinghouse Air vs. Penn National Gaming | Westinghouse Air vs. Chengdu PUTIAN Telecommunications | Westinghouse Air vs. MAVEN WIRELESS SWEDEN | Westinghouse Air vs. Singapore Telecommunications Limited |
| Scandinavian Tobacco vs. Gaztransport Technigaz SA | Scandinavian Tobacco vs. Air Transport Services | Scandinavian Tobacco vs. Transport International Holdings | Scandinavian Tobacco vs. PLAYWAY SA ZY 10 |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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