Correlation Between Scandinavian Tobacco and Tertiary Minerals

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

Diversification Opportunities for Scandinavian Tobacco and Tertiary Minerals

0.66

Correlation Coefficient

Scandinavian Tobacco  Tertiary Minerals

Poor diversification

The 3 months correlation between Scandinavian and Tertiary is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Tertiary Minerals Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tertiary Minerals 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 Tertiary Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tertiary Minerals Plc has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Tertiary Minerals go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Tertiary Minerals

Assuming the 90 days trading horizon Scandinavian Tobacco Group is expected to under-perform the Tertiary Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Scandinavian Tobacco Group is 3.51 times less risky than Tertiary Minerals. The stock trades about -0.08 of its potential returns per unit of risk. The Tertiary Minerals Plc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Tertiary Minerals Plc on April 24, 2025 and sell it today you would earn a total of  0.05  from holding Tertiary Minerals Plc or generate 1.25% return on investment over 90 days.

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

Scandinavian Tobacco Group  vs.  Tertiary Minerals Plc

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.

Tertiary Minerals Plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tertiary Minerals Plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Tertiary Minerals exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scandinavian Tobacco and Tertiary Minerals

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

The idea behind Scandinavian Tobacco Group and Tertiary Minerals 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.