Correlation Between Thales SA and Singapore Technologies

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

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

Diversification Opportunities for Thales SA and Singapore Technologies

0.89

Correlation Coefficient

Thales SA  Singapore Technologies

Very poor diversification

The 3 months correlation between Thales and Singapore is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Thales SA and Singapore Technologies Enginee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Technologies and Thales SA 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 Thales SA are associated (or correlated) with Singapore Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Technologies has no effect on the direction of Thales SA i.e., Thales SA and Singapore Technologies go up and down completely randomly.

Pair Corralation between Thales SA and Singapore Technologies

Assuming the 90 days horizon Thales SA is expected to generate 0.86 times more return on investment than Singapore Technologies. However, Thales SA is 1.17 times less risky than Singapore Technologies. It trades about 0.23 of its potential returns per unit of risk. Singapore Technologies Engineering is currently generating about 0.17 per unit of risk. If you would invest  14,520  in Thales SA on December 30, 2024 and sell it today you would earn a total of  11,685  from holding Thales SA or generate 80.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.08%
Values	Daily Returns

Thales SA  vs.  Singapore Technologies Enginee

Thales SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Thales SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Thales SA reported solid returns over the last few months and may actually be approaching a breakup point.

Singapore Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Technologies Engineering are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Singapore Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Thales SA and Singapore Technologies

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

The idea behind Thales SA and Singapore Technologies Engineering 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.