Correlation Between Singapore Telecommunicatio and Sterling Construction

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

Diversification Opportunities for Singapore Telecommunicatio and Sterling Construction

-0.02

Correlation Coefficient

Singapore Telecommunicatio  Sterling Construction

Good diversification

The 3 months correlation between Singapore and Sterling is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Telecommunications L and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction 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 Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of Singapore Telecommunicatio i.e., Singapore Telecommunicatio and Sterling Construction go up and down completely randomly.

Pair Corralation between Singapore Telecommunicatio and Sterling Construction

Assuming the 90 days trading horizon Singapore Telecommunications Limited is expected to generate 0.65 times more return on investment than Sterling Construction. However, Singapore Telecommunications Limited is 1.54 times less risky than Sterling Construction. It trades about 0.07 of its potential returns per unit of risk. Sterling Construction is currently generating about -0.18 per unit of risk. If you would invest  212.00  in Singapore Telecommunications Limited on September 29, 2024 and sell it today you would earn a total of  4.00  from holding Singapore Telecommunications Limited or generate 1.89% return on investment over 90 days.

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

Singapore Telecommunications L  vs.  Sterling Construction

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sterling Construction

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Construction are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sterling Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Singapore Telecommunicatio and Sterling Construction

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

The idea behind Singapore Telecommunications Limited and Sterling Construction 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.