Correlation Between Chevron and Singapore Airlines

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

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

Diversification Opportunities for Chevron and Singapore Airlines

-0.02

Correlation Coefficient

Chevron  Singapore Airlines

Good diversification

The 3 months correlation between Chevron and Singapore is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Chevron and Singapore Airlines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Airlines and Chevron 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 Chevron 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 Chevron i.e., Chevron and Singapore Airlines go up and down completely randomly.

Pair Corralation between Chevron and Singapore Airlines

Assuming the 90 days trading horizon Chevron is expected to generate 2.13 times less return on investment than Singapore Airlines. In addition to that, Chevron is 1.16 times more volatile than Singapore Airlines Limited. It trades about 0.03 of its total potential returns per unit of risk. Singapore Airlines Limited is currently generating about 0.08 per unit of volatility. If you would invest  392.00  in Singapore Airlines Limited on December 5, 2024 and sell it today you would earn a total of  93.00  from holding Singapore Airlines Limited or generate 23.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Chevron  vs.  Singapore Airlines Limited

Chevron

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chevron has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Chevron is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Singapore Airlines

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Airlines Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Singapore Airlines may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Chevron and Singapore Airlines

The main advantage of trading using opposite Chevron and Singapore Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron 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 Chevron 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.