Correlation Between Alphabet and Singapore Technologies

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

By analyzing existing cross correlation between Alphabet Inc Class A and Singapore Technologies Engineering, you can compare the effects of market volatilities on Alphabet and Singapore Technologies 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 Alphabet with a short position of Singapore Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Singapore Technologies.

Diversification Opportunities for Alphabet and Singapore Technologies

-0.49

Correlation Coefficient

Alphabet  Singapore Technologies

Very good diversification

The 3 months correlation between Alphabet and Singapore is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class A and Singapore Technologies Enginee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Technologies and Alphabet 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 Alphabet Inc Class A are associated (or correlated) with Singapore Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Technologies has no effect on the direction of Alphabet i.e., Alphabet and Singapore Technologies go up and down completely randomly.

Pair Corralation between Alphabet and Singapore Technologies

Assuming the 90 days horizon Alphabet is expected to generate 1.06 times less return on investment than Singapore Technologies. But when comparing it to its historical volatility, Alphabet Inc Class A is 1.34 times less risky than Singapore Technologies. It trades about 0.08 of its potential returns per unit of risk. Singapore Technologies Engineering is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,794  in Singapore Technologies Engineering on October 12, 2024 and sell it today you would earn a total of  655.00  from holding Singapore Technologies Engineering or generate 23.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.19%
Values	Daily Returns

Alphabet Inc Class A  vs.  Singapore Technologies Enginee

Alphabet Class A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile technical and fundamental indicators, Alphabet disclosed solid returns over the last few months and may actually be approaching a breakup point.

Singapore Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Singapore Technologies Engineering has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alphabet and Singapore Technologies

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

The idea behind Alphabet Inc Class A and Singapore Technologies Engineering 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.