Correlation Between SINGAPORE AIRLINES and RELIANCE STEEL

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

By analyzing existing cross correlation between SINGAPORE AIRLINES and RELIANCE STEEL AL, you can compare the effects of market volatilities on SINGAPORE AIRLINES and RELIANCE STEEL 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 RELIANCE STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of SINGAPORE AIRLINES and RELIANCE STEEL.

Diversification Opportunities for SINGAPORE AIRLINES and RELIANCE STEEL

-0.32

Correlation Coefficient

SINGAPORE AIRLINES  RELIANCE STEEL

Very good diversification

The 3 months correlation between SINGAPORE and RELIANCE is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding SINGAPORE AIRLINES and RELIANCE STEEL AL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELIANCE STEEL AL 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 are associated (or correlated) with RELIANCE STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RELIANCE STEEL AL has no effect on the direction of SINGAPORE AIRLINES i.e., SINGAPORE AIRLINES and RELIANCE STEEL go up and down completely randomly.

Pair Corralation between SINGAPORE AIRLINES and RELIANCE STEEL

Assuming the 90 days trading horizon SINGAPORE AIRLINES is expected to under-perform the RELIANCE STEEL. But the stock apears to be less risky and, when comparing its historical volatility, SINGAPORE AIRLINES is 1.47 times less risky than RELIANCE STEEL. The stock trades about -0.04 of its potential returns per unit of risk. The RELIANCE STEEL AL is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  25,786  in RELIANCE STEEL AL on September 28, 2024 and sell it today you would earn a total of  4.00  from holding RELIANCE STEEL AL or generate 0.02% return on investment over 90 days.

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

SINGAPORE AIRLINES  vs.  RELIANCE STEEL AL

SINGAPORE AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SINGAPORE AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, SINGAPORE AIRLINES is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

RELIANCE STEEL AL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RELIANCE STEEL AL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, RELIANCE STEEL is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with SINGAPORE AIRLINES and RELIANCE STEEL

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

The idea behind SINGAPORE AIRLINES and RELIANCE STEEL AL 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.