Correlation Between Singapore Airlines and Rai Way

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

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

Diversification Opportunities for Singapore Airlines and Rai Way

0.34

Correlation Coefficient

Singapore Airlines  Rai Way

Weak diversification

The 3 months correlation between Singapore and Rai is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Airlines Limited and Rai Way SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rai Way SpA and Singapore Airlines 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 Airlines Limited are associated (or correlated) with Rai Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rai Way SpA has no effect on the direction of Singapore Airlines i.e., Singapore Airlines and Rai Way go up and down completely randomly.

Pair Corralation between Singapore Airlines and Rai Way

Assuming the 90 days trading horizon Singapore Airlines is expected to generate 1.19 times less return on investment than Rai Way. But when comparing it to its historical volatility, Singapore Airlines Limited is 2.02 times less risky than Rai Way. It trades about 0.16 of its potential returns per unit of risk. Rai Way SpA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  508.00  in Rai Way SpA on December 1, 2024 and sell it today you would earn a total of  46.00  from holding Rai Way SpA or generate 9.06% return on investment over 90 days.

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

Singapore Airlines Limited  vs.  Rai Way SpA

Singapore Airlines

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Airlines Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Singapore Airlines may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Rai Way SpA

Risk-Adjusted Performance

OK

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

Pair Trading with Singapore Airlines and Rai Way

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

The idea behind Singapore Airlines Limited and Rai Way SpA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.