Correlation Between Singapore Technologies and Singapore Exchange

Can any of the company-specific risk be diversified away by investing in both Singapore Technologies 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 Singapore Technologies and Singapore Exchange 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 Singapore Exchange Ltd, you can compare the effects of market volatilities on Singapore Technologies 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 Singapore Technologies with a short position of Singapore Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singapore Technologies and Singapore Exchange.

Diversification Opportunities for Singapore Technologies and Singapore Exchange

0.22

Correlation Coefficient

Singapore Technologies  Singapore Exchange

Modest diversification

The 3 months correlation between Singapore and Singapore is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Technologies Enginee and Singapore Exchange Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Exchange 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 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 Singapore Technologies i.e., Singapore Technologies and Singapore Exchange go up and down completely randomly.

Pair Corralation between Singapore Technologies and Singapore Exchange

Assuming the 90 days horizon Singapore Technologies Engineering is expected to under-perform the Singapore Exchange. In addition to that, Singapore Technologies is 1.99 times more volatile than Singapore Exchange Ltd. It trades about -0.1 of its total potential returns per unit of risk. Singapore Exchange Ltd is currently generating about -0.07 per unit of volatility. If you would invest  1,863  in Singapore Exchange Ltd on October 11, 2024 and sell it today you would lose (22.00) from holding Singapore Exchange Ltd or give up 1.18% of portfolio value over 90 days.

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

Singapore Technologies Enginee  vs.  Singapore Exchange Ltd

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.

Singapore Exchange

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Singapore Technologies and Singapore Exchange

The main advantage of trading using opposite Singapore Technologies and Singapore Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore Technologies 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 Singapore Technologies Engineering and Singapore Exchange Ltd 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.