Correlation Between CATLIN GROUP and Scandinavian Tobacco

Can any of the company-specific risk be diversified away by investing in both CATLIN GROUP and Scandinavian Tobacco 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 CATLIN GROUP and Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CATLIN GROUP and Scandinavian Tobacco Group, you can compare the effects of market volatilities on CATLIN GROUP and Scandinavian Tobacco 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 CATLIN GROUP with a short position of Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of CATLIN GROUP and Scandinavian Tobacco.

Diversification Opportunities for CATLIN GROUP and Scandinavian Tobacco

-0.05

Correlation Coefficient

CATLIN GROUP  Scandinavian Tobacco

Good diversification

The 3 months correlation between CATLIN and Scandinavian is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding CATLIN GROUP and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco and CATLIN GROUP 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 CATLIN GROUP are associated (or correlated) with Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of CATLIN GROUP i.e., CATLIN GROUP and Scandinavian Tobacco go up and down completely randomly.

Pair Corralation between CATLIN GROUP and Scandinavian Tobacco

Assuming the 90 days trading horizon CATLIN GROUP is expected to generate 0.44 times more return on investment than Scandinavian Tobacco. However, CATLIN GROUP is 2.29 times less risky than Scandinavian Tobacco. It trades about -0.06 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.04 per unit of risk. If you would invest  8,200  in CATLIN GROUP on April 21, 2025 and sell it today you would lose (250.00) from holding CATLIN GROUP or give up 3.05% of portfolio value over 90 days.

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

CATLIN GROUP   vs.  Scandinavian Tobacco Group

CATLIN GROUP

Risk-Adjusted Performance

Very Weak

Over the last 90 days CATLIN GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CATLIN GROUP is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 comparatively stable basic indicators, Scandinavian Tobacco is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CATLIN GROUP and Scandinavian Tobacco

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

The idea behind CATLIN GROUP and Scandinavian Tobacco Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.