Correlation Between KeppelLimited and DBS Group

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

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

Diversification Opportunities for KeppelLimited and DBS Group

0.48

Correlation Coefficient

KeppelLimited  DBS Group

Very weak diversification

The 3 months correlation between KeppelLimited and DBS is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Keppel Limited and DBS Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBS Group Holdings and KeppelLimited 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 Keppel Limited are associated (or correlated) with DBS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBS Group Holdings has no effect on the direction of KeppelLimited i.e., KeppelLimited and DBS Group go up and down completely randomly.

Pair Corralation between KeppelLimited and DBS Group

Assuming the 90 days horizon Keppel Limited is expected to generate 1.88 times more return on investment than DBS Group. However, KeppelLimited is 1.88 times more volatile than DBS Group Holdings. It trades about 0.06 of its potential returns per unit of risk. DBS Group Holdings is currently generating about 0.11 per unit of risk. If you would invest  940.00  in Keppel Limited on October 24, 2024 and sell it today you would earn a total of  85.00  from holding Keppel Limited or generate 9.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Keppel Limited  vs.  DBS Group Holdings

Keppel Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Keppel Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, KeppelLimited may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DBS Group Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DBS Group Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, DBS Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KeppelLimited and DBS Group

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

The idea behind Keppel Limited and DBS Group Holdings 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.