Correlation Between Scandinavian Tobacco and Axfood AB

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

Diversification Opportunities for Scandinavian Tobacco and Axfood AB

-0.49

Correlation Coefficient

Scandinavian Tobacco  Axfood AB

Very good diversification

The 3 months correlation between Scandinavian and Axfood is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and Axfood AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axfood AB 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 Axfood AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axfood AB has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and Axfood AB go up and down completely randomly.

Pair Corralation between Scandinavian Tobacco and Axfood AB

Assuming the 90 days horizon Scandinavian Tobacco Group is expected to under-perform the Axfood AB. In addition to that, Scandinavian Tobacco is 1.33 times more volatile than Axfood AB. It trades about -0.02 of its total potential returns per unit of risk. Axfood AB is currently generating about 0.13 per unit of volatility. If you would invest  2,211  in Axfood AB on April 20, 2025 and sell it today you would earn a total of  326.00  from holding Axfood AB or generate 14.74% return on investment over 90 days.

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

Scandinavian Tobacco Group  vs.  Axfood AB

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. 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.

Axfood AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axfood AB are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Axfood AB reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scandinavian Tobacco and Axfood AB

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

The idea behind Scandinavian Tobacco Group and Axfood AB 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.