Correlation Between City Developments and Singapore Exchange

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

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

Diversification Opportunities for City Developments and Singapore Exchange

0.2

Correlation Coefficient

City Developments  Singapore Exchange

Modest diversification

The 3 months correlation between City and Singapore is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding City Developments and Singapore Exchange Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Exchange and City Developments 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 City Developments 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 City Developments i.e., City Developments and Singapore Exchange go up and down completely randomly.

Pair Corralation between City Developments and Singapore Exchange

Assuming the 90 days horizon City Developments is expected to generate 2.05 times less return on investment than Singapore Exchange. In addition to that, City Developments is 1.23 times more volatile than Singapore Exchange Ltd. It trades about 0.04 of its total potential returns per unit of risk. Singapore Exchange Ltd is currently generating about 0.09 per unit of volatility. If you would invest  1,808  in Singapore Exchange Ltd on December 20, 2024 and sell it today you would earn a total of  178.00  from holding Singapore Exchange Ltd or generate 9.85% return on investment over 90 days.

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

City Developments  vs.  Singapore Exchange Ltd

City Developments

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in City Developments are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, City Developments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Singapore Exchange

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Exchange Ltd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Singapore Exchange may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with City Developments and Singapore Exchange

The main advantage of trading using opposite City Developments and Singapore Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Developments 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 City Developments and Singapore Exchange Ltd 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.