Correlation Between Singapore Exchange and ASX Limited

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

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

Diversification Opportunities for Singapore Exchange and ASX Limited

-0.03

Correlation Coefficient

Singapore Exchange  ASX Limited

Good diversification

The 3 months correlation between Singapore and ASX is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Exchange Limited and ASX Limited ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX Limited ADR and Singapore Exchange 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 Exchange Limited are associated (or correlated) with ASX Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASX Limited ADR has no effect on the direction of Singapore Exchange i.e., Singapore Exchange and ASX Limited go up and down completely randomly.

Pair Corralation between Singapore Exchange and ASX Limited

Assuming the 90 days horizon Singapore Exchange Limited is expected to generate 1.51 times more return on investment than ASX Limited. However, Singapore Exchange is 1.51 times more volatile than ASX Limited ADR. It trades about -0.01 of its potential returns per unit of risk. ASX Limited ADR is currently generating about -0.47 per unit of risk. If you would invest  920.00  in Singapore Exchange Limited on October 9, 2024 and sell it today you would lose (5.00) from holding Singapore Exchange Limited or give up 0.54% of portfolio value over 90 days.

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

Singapore Exchange Limited  vs.  ASX Limited ADR

Singapore Exchange

Risk-Adjusted Performance

6 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Exchange Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Singapore Exchange may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ASX Limited ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASX Limited ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental 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 Exchange and ASX Limited

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

The idea behind Singapore Exchange Limited and ASX Limited 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.