Correlation Between Brown Forman and Singapore Airlines

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

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

Diversification Opportunities for Brown Forman and Singapore Airlines

0.2

Correlation Coefficient

Brown Forman  Singapore Airlines

Modest diversification

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

Pair Corralation between Brown Forman and Singapore Airlines

Assuming the 90 days trading horizon Brown Forman is expected to under-perform the Singapore Airlines. In addition to that, Brown Forman is 2.98 times more volatile than Singapore Airlines Limited. It trades about -0.1 of its total potential returns per unit of risk. Singapore Airlines Limited is currently generating about 0.07 per unit of volatility. If you would invest  452.00  in Singapore Airlines Limited on December 25, 2024 and sell it today you would earn a total of  18.00  from holding Singapore Airlines Limited or generate 3.98% return on investment over 90 days.

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

Brown Forman  vs.  Singapore Airlines Limited

Brown Forman

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brown Forman has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Singapore Airlines

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Airlines Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Singapore Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Brown Forman and Singapore Airlines

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

The idea behind Brown Forman and Singapore Airlines 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.