Correlation Between Singapore Technologies and Wilmar International

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

Diversification Opportunities for Singapore Technologies and Wilmar International

0.61

Correlation Coefficient

Singapore Technologies  Wilmar International

Poor diversification

The 3 months correlation between Singapore and Wilmar is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Technologies Enginee and Wilmar International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmar International 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 Wilmar International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmar International has no effect on the direction of Singapore Technologies i.e., Singapore Technologies and Wilmar International go up and down completely randomly.

Pair Corralation between Singapore Technologies and Wilmar International

Assuming the 90 days horizon Singapore Technologies Engineering is expected to generate 2.11 times more return on investment than Wilmar International. However, Singapore Technologies is 2.11 times more volatile than Wilmar International. It trades about 0.23 of its potential returns per unit of risk. Wilmar International is currently generating about 0.14 per unit of risk. If you would invest  3,328  in Singapore Technologies Engineering on December 21, 2024 and sell it today you would earn a total of  1,617  from holding Singapore Technologies Engineering or generate 48.59% return on investment over 90 days.

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

Singapore Technologies Enginee  vs.  Wilmar International

Singapore Technologies

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Technologies Engineering are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Singapore Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Wilmar International

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wilmar International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Wilmar International showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Singapore Technologies and Wilmar International

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

The idea behind Singapore Technologies Engineering and Wilmar International 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.