Correlation Between ASX and Singapore Exchange

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

By analyzing existing cross correlation between ASX Limited and Singapore Exchange Limited, you can compare the effects of market volatilities on ASX and Singapore Exchange 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 ASX with a short position of Singapore Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASX and Singapore Exchange.

Diversification Opportunities for ASX and Singapore Exchange

-0.28

Correlation Coefficient

ASX  Singapore Exchange

Very good diversification

The 3 months correlation between ASX and Singapore is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding ASX Limited and Singapore Exchange Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Exchange and ASX 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 ASX Limited are associated (or correlated) with Singapore Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Exchange has no effect on the direction of ASX i.e., ASX and Singapore Exchange go up and down completely randomly.

Pair Corralation between ASX and Singapore Exchange

Assuming the 90 days horizon ASX Limited is expected to under-perform the Singapore Exchange. In addition to that, ASX is 1.29 times more volatile than Singapore Exchange Limited. It trades about -0.01 of its total potential returns per unit of risk. Singapore Exchange Limited is currently generating about 0.01 per unit of volatility. If you would invest  920.00  in Singapore Exchange Limited on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Singapore Exchange Limited or generate 0.0% return on investment over 90 days.

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

ASX Limited  vs.  Singapore Exchange Limited

ASX Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASX Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, ASX is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Singapore Exchange

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Exchange Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Singapore Exchange may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ASX and Singapore Exchange

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

The idea behind ASX Limited and Singapore Exchange Limited 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.