Correlation Between BAE Systems and Singapore Technologies
Can any of the company-specific risk be diversified away by investing in both BAE Systems 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 BAE Systems and Singapore Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BAE Systems PLC and Singapore Technologies Engineering, you can compare the effects of market volatilities on BAE Systems 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 BAE Systems with a short position of Singapore Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of BAE Systems and Singapore Technologies.
Diversification Opportunities for BAE Systems and Singapore Technologies
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BAE and Singapore is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding BAE Systems PLC and Singapore Technologies Enginee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Technologies and BAE Systems 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 BAE Systems PLC 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 BAE Systems i.e., BAE Systems and Singapore Technologies go up and down completely randomly.
Pair Corralation between BAE Systems and Singapore Technologies
Assuming the 90 days horizon BAE Systems is expected to generate 4.81 times less return on investment than Singapore Technologies. In addition to that, BAE Systems is 1.2 times more volatile than Singapore Technologies Engineering. It trades about 0.01 of its total potential returns per unit of risk. Singapore Technologies Engineering is currently generating about 0.08 per unit of volatility. If you would invest 320.00 in Singapore Technologies Engineering on August 27, 2024 and sell it today you would earn a total of 11.00 from holding Singapore Technologies Engineering or generate 3.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BAE Systems PLC vs. Singapore Technologies Enginee
Performance |
| Timeline |
| BAE Systems PLC |
| Singapore Technologies |
BAE Systems and Singapore Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BAE Systems and Singapore Technologies
The main advantage of trading using opposite BAE Systems and Singapore Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BAE Systems 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.| BAE Systems vs. Huntington Ingalls Industries | BAE Systems vs. Rheinmetall AG ADR | BAE Systems vs. Airbus Group NV | BAE Systems vs. General Dynamics |
| Singapore Technologies vs. Moog Inc | Singapore Technologies vs. BAE Systems PLC | Singapore Technologies vs. Park Electrochemical | Singapore Technologies vs. Triumph Group |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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