Correlation Between London Stock and Singapore Exchange

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

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

Diversification Opportunities for London Stock and Singapore Exchange

0.52

Correlation Coefficient

London Stock  Singapore Exchange

Very weak diversification

The 3 months correlation between London and Singapore is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding London Stock Exchange and Singapore Exchange Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Exchange and London Stock 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 London Stock Exchange 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 London Stock i.e., London Stock and Singapore Exchange go up and down completely randomly.

Pair Corralation between London Stock and Singapore Exchange

Assuming the 90 days horizon London Stock is expected to generate 2.84 times less return on investment than Singapore Exchange. In addition to that, London Stock is 1.08 times more volatile than Singapore Exchange Limited. It trades about 0.09 of its total potential returns per unit of risk. Singapore Exchange Limited is currently generating about 0.29 per unit of volatility. If you would invest  851.00  in Singapore Exchange Limited on September 5, 2024 and sell it today you would earn a total of  100.00  from holding Singapore Exchange Limited or generate 11.75% return on investment over 90 days.

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

London Stock Exchange  vs.  Singapore Exchange Limited

London Stock Exchange

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in London Stock Exchange are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, London Stock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Singapore Exchange

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Exchange Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Singapore Exchange reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with London Stock and Singapore Exchange

The main advantage of trading using opposite London Stock and Singapore Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Stock 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 London Stock Exchange and Singapore Exchange 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 Global Correlations module to find global opportunities by holding instruments from different markets.