Correlation Between Singapore Telecommunicatio and China Communications

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

Diversification Opportunities for Singapore Telecommunicatio and China Communications

0.28

Correlation Coefficient

Singapore Telecommunicatio  China Communications

Modest diversification

The 3 months correlation between Singapore and China is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Telecommunications L and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications 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 China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Singapore Telecommunicatio i.e., Singapore Telecommunicatio and China Communications go up and down completely randomly.

Pair Corralation between Singapore Telecommunicatio and China Communications

Assuming the 90 days trading horizon Singapore Telecommunications Limited is expected to generate 0.98 times more return on investment than China Communications. However, Singapore Telecommunications Limited is 1.02 times less risky than China Communications. It trades about 0.08 of its potential returns per unit of risk. China Communications Services is currently generating about -0.07 per unit of risk. If you would invest  216.00  in Singapore Telecommunications Limited on October 20, 2024 and sell it today you would earn a total of  4.00  from holding Singapore Telecommunications Limited or generate 1.85% return on investment over 90 days.

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

Singapore Telecommunications L  vs.  China Communications Services

Singapore Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

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

China Communications

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Singapore Telecommunicatio and China Communications

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

The idea behind Singapore Telecommunications Limited and China Communications Services 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.