Correlation Between Singapore Telecommunicatio and Amazon

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

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

Diversification Opportunities for Singapore Telecommunicatio and Amazon

0.18

Correlation Coefficient

Singapore Telecommunicatio  Amazon

Average diversification

The 3 months correlation between Singapore and Amazon is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Telecommunications L and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and Singapore Telecommunicatio 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 Telecommunications Limited are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Singapore Telecommunicatio i.e., Singapore Telecommunicatio and Amazon go up and down completely randomly.

Pair Corralation between Singapore Telecommunicatio and Amazon

Assuming the 90 days trading horizon Singapore Telecommunicatio is expected to generate 2.58 times less return on investment than Amazon. But when comparing it to its historical volatility, Singapore Telecommunications Limited is 1.19 times less risky than Amazon. It trades about 0.05 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  8,999  in Amazon Inc on October 11, 2024 and sell it today you would earn a total of  12,446  from holding Amazon Inc or generate 138.3% return on investment over 90 days.

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

Singapore Telecommunications L  vs.  Amazon Inc

Singapore Telecommunicatio

Risk-Adjusted Performance

2 of 100

Weak

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

Amazon Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Amazon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Singapore Telecommunicatio and Amazon

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

The idea behind Singapore Telecommunications Limited and Amazon Inc 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.