Correlation Between Singapore Telecommunicatio and Telenor ASA

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

Diversification Opportunities for Singapore Telecommunicatio and Telenor ASA

0.6

Correlation Coefficient

Singapore Telecommunicatio  Telenor ASA

Poor diversification

The 3 months correlation between Singapore and Telenor is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Telecommunications L and Telenor ASA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telenor ASA ADR 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 Telenor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telenor ASA ADR has no effect on the direction of Singapore Telecommunicatio i.e., Singapore Telecommunicatio and Telenor ASA go up and down completely randomly.

Pair Corralation between Singapore Telecommunicatio and Telenor ASA

Assuming the 90 days horizon Singapore Telecommunications Limited is expected to generate 4.45 times more return on investment than Telenor ASA. However, Singapore Telecommunicatio is 4.45 times more volatile than Telenor ASA ADR. It trades about 0.05 of its potential returns per unit of risk. Telenor ASA ADR is currently generating about 0.03 per unit of risk. If you would invest  150.00  in Singapore Telecommunications Limited on October 5, 2024 and sell it today you would earn a total of  77.00  from holding Singapore Telecommunications Limited or generate 51.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	73.13%
Values	Daily Returns

Singapore Telecommunications L  vs.  Telenor ASA ADR

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Telenor ASA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telenor ASA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Singapore Telecommunicatio and Telenor ASA

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

The idea behind Singapore Telecommunications Limited and Telenor ASA ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.