Correlation Between Scandinavian Tobacco and Linde Plc

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

Diversification Opportunities for Scandinavian Tobacco and Linde Plc

0.55

Correlation Coefficient

Scandinavian Tobacco  Linde Plc

Very weak diversification

The 3 months correlation between Scandinavian and Linde is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Linde plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Linde plc 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 Linde Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Linde plc has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Linde Plc go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Linde Plc

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to generate 1.16 times more return on investment than Linde Plc. However, Scandinavian Tobacco is 1.16 times more volatile than Linde plc. It trades about 0.03 of its potential returns per unit of risk. Linde plc is currently generating about -0.09 per unit of risk. If you would invest  1,276  in Scandinavian Tobacco Group on February 9, 2025 and sell it today you would earn a total of  32.00  from holding Scandinavian Tobacco Group or generate 2.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  Linde plc

Scandinavian Tobacco

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Scandinavian Tobacco Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Scandinavian Tobacco is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Linde plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Linde plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Scandinavian Tobacco and Linde Plc

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

The idea behind Scandinavian Tobacco Group and Linde plc 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.