Correlation Between Singapore Exchange and City Developments

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

By analyzing existing cross correlation between Singapore Exchange Ltd and City Developments, you can compare the effects of market volatilities on Singapore Exchange and City Developments 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 City Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singapore Exchange and City Developments.

Diversification Opportunities for Singapore Exchange and City Developments

0.29

Correlation Coefficient

Singapore Exchange  City Developments

Modest diversification

The 3 months correlation between Singapore and City is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Exchange Ltd and City Developments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Developments 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 Ltd are associated (or correlated) with City Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Developments has no effect on the direction of Singapore Exchange i.e., Singapore Exchange and City Developments go up and down completely randomly.

Pair Corralation between Singapore Exchange and City Developments

Assuming the 90 days horizon Singapore Exchange Ltd is expected to generate 0.41 times more return on investment than City Developments. However, Singapore Exchange Ltd is 2.41 times less risky than City Developments. It trades about 0.0 of its potential returns per unit of risk. City Developments is currently generating about -0.07 per unit of risk. If you would invest  1,841  in Singapore Exchange Ltd on October 12, 2024 and sell it today you would earn a total of  0.00  from holding Singapore Exchange Ltd or generate 0.0% return on investment over 90 days.

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

Singapore Exchange Ltd  vs.  City Developments

Singapore Exchange

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Exchange Ltd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Singapore Exchange showed solid returns over the last few months and may actually be approaching a breakup point.

City Developments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days City Developments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, City Developments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Singapore Exchange and City Developments

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

The idea behind Singapore Exchange Ltd and City Developments 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.