Correlation Between Scandinavian Tobacco and International Biotechnology

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

Diversification Opportunities for Scandinavian Tobacco and International Biotechnology

-0.2

Correlation Coefficient

Scandinavian Tobacco  International Biotechnology

Good diversification

The 3 months correlation between Scandinavian and International is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and International Biotechnology Tr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Biotechnology 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 International Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Biotechnology has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and International Biotechnology go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and International Biotechnology

Assuming the 90 days trading horizon Scandinavian Tobacco Group is expected to under-perform the International Biotechnology. But the stock apears to be less risky and, when comparing its historical volatility, Scandinavian Tobacco Group is 1.02 times less risky than International Biotechnology. The stock trades about -0.08 of its potential returns per unit of risk. The International Biotechnology Trust is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  58,600  in International Biotechnology Trust on April 24, 2025 and sell it today you would earn a total of  5,400  from holding International Biotechnology Trust or generate 9.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Scandinavian Tobacco Group  vs.  International Biotechnology Tr

Scandinavian Tobacco

Risk-Adjusted Performance

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 uncertain 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.

International Biotechnology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Biotechnology Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, International Biotechnology may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Scandinavian Tobacco and International Biotechnology

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

The idea behind Scandinavian Tobacco Group and International Biotechnology Trust 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.