Correlation Between Shanghai Industrial and Keppel

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

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

Diversification Opportunities for Shanghai Industrial and Keppel

0.0

Correlation Coefficient

Shanghai Industrial  Keppel

Pay attention - limited upside

The 3 months correlation between Shanghai and Keppel is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Shanghai Industrial Holdings and Keppel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keppel Limited and Shanghai Industrial 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 Shanghai Industrial Holdings are associated (or correlated) with Keppel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keppel Limited has no effect on the direction of Shanghai Industrial i.e., Shanghai Industrial and Keppel go up and down completely randomly.

Pair Corralation between Shanghai Industrial and Keppel

If you would invest  971.00  in Keppel Limited on October 25, 2024 and sell it today you would earn a total of  2.00  from holding Keppel Limited or generate 0.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Shanghai Industrial Holdings  vs.  Keppel Limited

Shanghai Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shanghai Industrial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Shanghai Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Keppel Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Keppel Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Keppel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Shanghai Industrial and Keppel

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

The idea behind Shanghai Industrial Holdings and Keppel 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.

Check out your portfolio center.

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.