Correlation Between Singapore Airlines and Safety Insurance

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

Diversification Opportunities for Singapore Airlines and Safety Insurance

-0.14

Correlation Coefficient

Singapore Airlines  Safety Insurance

Good diversification

The 3 months correlation between Singapore and Safety is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Airlines Limited and Safety Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Insurance 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 Safety Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Insurance has no effect on the direction of Singapore Airlines i.e., Singapore Airlines and Safety Insurance go up and down completely randomly.

Pair Corralation between Singapore Airlines and Safety Insurance

Assuming the 90 days trading horizon Singapore Airlines is expected to generate 1.36 times less return on investment than Safety Insurance. But when comparing it to its historical volatility, Singapore Airlines Limited is 1.18 times less risky than Safety Insurance. It trades about 0.05 of its potential returns per unit of risk. Safety Insurance Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,533  in Safety Insurance Group on September 17, 2024 and sell it today you would earn a total of  1,317  from holding Safety Insurance Group or generate 20.16% return on investment over 90 days.

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

Singapore Airlines Limited  vs.  Safety Insurance Group

Singapore Airlines

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Airlines Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Singapore Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Safety Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Safety Insurance Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Safety Insurance may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Singapore Airlines and Safety Insurance

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

The idea behind Singapore Airlines Limited and Safety Insurance Group 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.