Correlation Between Singapore Technologies and QinetiQ Group

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

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

Diversification Opportunities for Singapore Technologies and QinetiQ Group

0.6

Correlation Coefficient

Singapore Technologies  QinetiQ Group

Poor diversification

The 3 months correlation between Singapore and QinetiQ is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Technologies Enginee and QinetiQ Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QinetiQ Group plc and Singapore Technologies 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 Singapore Technologies Engineering are associated (or correlated) with QinetiQ Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QinetiQ Group plc has no effect on the direction of Singapore Technologies i.e., Singapore Technologies and QinetiQ Group go up and down completely randomly.

Pair Corralation between Singapore Technologies and QinetiQ Group

Assuming the 90 days horizon Singapore Technologies Engineering is expected to generate 1.03 times more return on investment than QinetiQ Group. However, Singapore Technologies is 1.03 times more volatile than QinetiQ Group plc. It trades about 0.17 of its potential returns per unit of risk. QinetiQ Group plc is currently generating about 0.07 per unit of risk. If you would invest  336.00  in Singapore Technologies Engineering on December 30, 2024 and sell it today you would earn a total of  203.00  from holding Singapore Technologies Engineering or generate 60.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.67%
Values	Daily Returns

Singapore Technologies Enginee  vs.  QinetiQ Group plc

Singapore Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Technologies Engineering are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Singapore Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

QinetiQ Group plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in QinetiQ Group plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, QinetiQ Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Singapore Technologies and QinetiQ Group

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

The idea behind Singapore Technologies Engineering and QinetiQ Group plc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.