Correlation Between TMX Group and Singapore Exchange

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

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

Diversification Opportunities for TMX Group and Singapore Exchange

0.77

Correlation Coefficient

TMX Group  Singapore Exchange

Poor diversification

The 3 months correlation between TMX and Singapore is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding TMX Group Limited and Singapore Exchange Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Exchange and TMX Group 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 TMX Group Limited are associated (or correlated) with Singapore Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Exchange has no effect on the direction of TMX Group i.e., TMX Group and Singapore Exchange go up and down completely randomly.

Pair Corralation between TMX Group and Singapore Exchange

Assuming the 90 days horizon TMX Group Limited is expected to generate 1.0 times more return on investment than Singapore Exchange. However, TMX Group is 1.0 times more volatile than Singapore Exchange Ltd. It trades about 0.11 of its potential returns per unit of risk. Singapore Exchange Ltd is currently generating about 0.05 per unit of risk. If you would invest  3,135  in TMX Group Limited on December 4, 2024 and sell it today you would earn a total of  365.00  from holding TMX Group Limited or generate 11.64% return on investment over 90 days.

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

TMX Group Limited  vs.  Singapore Exchange Ltd

TMX Group Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TMX Group Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, TMX Group reported solid returns over the last few months and may actually be approaching a breakup point.

Singapore Exchange

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Exchange Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Singapore Exchange is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TMX Group and Singapore Exchange

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

The idea behind TMX Group Limited and Singapore Exchange Ltd 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.