Correlation Between American Balanced and Singapore Airlines
Can any of the company-specific risk be diversified away by investing in both American Balanced and Singapore Airlines 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 American Balanced and Singapore Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Balanced and Singapore Airlines, you can compare the effects of market volatilities on American Balanced and Singapore Airlines 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 American Balanced with a short position of Singapore Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Balanced and Singapore Airlines.
Diversification Opportunities for American Balanced and Singapore Airlines
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Singapore is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding American Balanced and Singapore Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Airlines and American Balanced 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 American Balanced are associated (or correlated) with Singapore Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Airlines has no effect on the direction of American Balanced i.e., American Balanced and Singapore Airlines go up and down completely randomly.
Pair Corralation between American Balanced and Singapore Airlines
Assuming the 90 days horizon American Balanced is expected to generate 0.72 times more return on investment than Singapore Airlines. However, American Balanced is 1.4 times less risky than Singapore Airlines. It trades about 0.22 of its potential returns per unit of risk. Singapore Airlines is currently generating about -0.09 per unit of risk. If you would invest 3,439 in American Balanced on November 3, 2024 and sell it today you would earn a total of 94.00 from holding American Balanced or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Balanced vs. Singapore Airlines
Performance |
| Timeline |
| American Balanced |
| Singapore Airlines |
American Balanced and Singapore Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Balanced and Singapore Airlines
The main advantage of trading using opposite American Balanced and Singapore Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Balanced position performs unexpectedly, Singapore Airlines 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 Airlines will offset losses from the drop in Singapore Airlines' long position.| American Balanced vs. Income Fund Of | American Balanced vs. Capital Income Builder | American Balanced vs. Capital World Growth | American Balanced vs. Growth Fund Of |
| Singapore Airlines vs. Cathay Pacific Airways | Singapore Airlines vs. Qantas Airways Ltd | Singapore Airlines vs. International Consolidated Airlines | Singapore Airlines vs. Singapore Airlines |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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