Correlation Between Scandinavian Tobacco and AllovirInc

Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and AllovirInc 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 AllovirInc 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 AllovirInc, you can compare the effects of market volatilities on Scandinavian Tobacco and AllovirInc 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 AllovirInc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and AllovirInc.

Diversification Opportunities for Scandinavian Tobacco and AllovirInc

-0.43

Correlation Coefficient

Scandinavian Tobacco  AllovirInc

Very good diversification

The 3 months correlation between Scandinavian and AllovirInc is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and AllovirInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AllovirInc 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 AllovirInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AllovirInc has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and AllovirInc go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and AllovirInc

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 1.83 times more return on investment than AllovirInc. However, Scandinavian Tobacco is 1.83 times more volatile than AllovirInc. It trades about 0.05 of its potential returns per unit of risk. AllovirInc is currently generating about -0.02 per unit of risk. If you would invest  1,948  in Scandinavian Tobacco Group on January 24, 2024 and sell it today you would lose (347.00) from holding Scandinavian Tobacco Group or give up 17.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  AllovirInc

Scandinavian Tobacco

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Scandinavian Tobacco Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Scandinavian Tobacco reported solid returns over the last few months and may actually be approaching a breakup point.

AllovirInc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AllovirInc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, AllovirInc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scandinavian Tobacco and AllovirInc

The main advantage of trading using opposite Scandinavian Tobacco and AllovirInc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, AllovirInc 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 AllovirInc will offset losses from the drop in AllovirInc's long position.

The idea behind Scandinavian Tobacco Group and AllovirInc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.