Correlation Between Scandinavian Tobacco and Axway Software

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

Diversification Opportunities for Scandinavian Tobacco and Axway Software

-0.71

Correlation Coefficient

Scandinavian Tobacco  Axway Software

Pay attention - limited upside

The 3 months correlation between Scandinavian and Axway is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Axway Software SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axway Software SA 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 Axway Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axway Software SA has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Axway Software go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Axway Software

Assuming the 90 days trading horizon Scandinavian Tobacco Group is expected to under-perform the Axway Software. But the stock apears to be less risky and, when comparing its historical volatility, Scandinavian Tobacco Group is 4.16 times less risky than Axway Software. The stock trades about -0.01 of its potential returns per unit of risk. The Axway Software SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,453  in Axway Software SA on September 13, 2024 and sell it today you would earn a total of  1,297  from holding Axway Software SA or generate 89.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.19%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  Axway Software SA

Scandinavian Tobacco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scandinavian Tobacco Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Axway Software SA

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axway Software SA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Axway Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scandinavian Tobacco and Axway Software

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

The idea behind Scandinavian Tobacco Group and Axway Software SA 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.