Correlation Between CHINA TELECOM and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both CHINA TELECOM 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 CHINA TELECOM and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHINA TELECOM H and Scandinavian Tobacco Group, you can compare the effects of market volatilities on CHINA TELECOM 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 CHINA TELECOM with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA TELECOM and Scandinavian Tobacco.
Diversification Opportunities for CHINA TELECOM and Scandinavian Tobacco
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CHINA and Scandinavian is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding CHINA TELECOM H and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and CHINA TELECOM 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 CHINA TELECOM H 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 CHINA TELECOM i.e., CHINA TELECOM and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between CHINA TELECOM and Scandinavian Tobacco
Assuming the 90 days trading horizon CHINA TELECOM H is expected to generate 2.68 times more return on investment than Scandinavian Tobacco. However, CHINA TELECOM is 2.68 times more volatile than Scandinavian Tobacco Group. It trades about 0.1 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about 0.02 per unit of risk. If you would invest 33.00 in CHINA TELECOM H on September 14, 2024 and sell it today you would earn a total of 19.00 from holding CHINA TELECOM H or generate 57.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHINA TELECOM H vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| CHINA TELECOM H |
| Scandinavian Tobacco |
CHINA TELECOM and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHINA TELECOM and Scandinavian Tobacco
The main advantage of trading using opposite CHINA TELECOM and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA TELECOM 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.| CHINA TELECOM vs. UNITED RENTALS | CHINA TELECOM vs. CAL MAINE FOODS | CHINA TELECOM vs. Shenandoah Telecommunications | CHINA TELECOM vs. MAROC TELECOM |
| Scandinavian Tobacco vs. CITIC Telecom International | Scandinavian Tobacco vs. SBM OFFSHORE | Scandinavian Tobacco vs. CHINA TELECOM H | Scandinavian Tobacco vs. Cogent Communications Holdings |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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