Correlation Between Singapore Telecommunicatio and Nippon Telegraph
Can any of the company-specific risk be diversified away by investing in both Singapore Telecommunicatio and Nippon Telegraph 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 Telecommunicatio and Nippon Telegraph into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Singapore Telecommunications PK and Nippon Telegraph Telephone, you can compare the effects of market volatilities on Singapore Telecommunicatio and Nippon Telegraph 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 Telecommunicatio with a short position of Nippon Telegraph. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singapore Telecommunicatio and Nippon Telegraph.
Diversification Opportunities for Singapore Telecommunicatio and Nippon Telegraph
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Singapore and Nippon is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Telecommunications P and Nippon Telegraph Telephone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Telegraph Tel and Singapore Telecommunicatio 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 Telecommunications PK are associated (or correlated) with Nippon Telegraph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Telegraph Tel has no effect on the direction of Singapore Telecommunicatio i.e., Singapore Telecommunicatio and Nippon Telegraph go up and down completely randomly.
Pair Corralation between Singapore Telecommunicatio and Nippon Telegraph
Assuming the 90 days horizon Singapore Telecommunications PK is expected to generate 0.37 times more return on investment than Nippon Telegraph. However, Singapore Telecommunications PK is 2.68 times less risky than Nippon Telegraph. It trades about 0.05 of its potential returns per unit of risk. Nippon Telegraph Telephone is currently generating about 0.02 per unit of risk. If you would invest 1,844 in Singapore Telecommunications PK on August 25, 2024 and sell it today you would earn a total of 494.00 from holding Singapore Telecommunications PK or generate 26.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.59% |
| Values | Daily Returns |
Singapore Telecommunications P vs. Nippon Telegraph Telephone
Performance |
| Timeline |
| Singapore Telecommunicatio |
| Nippon Telegraph Tel |
Singapore Telecommunicatio and Nippon Telegraph Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Singapore Telecommunicatio and Nippon Telegraph
The main advantage of trading using opposite Singapore Telecommunicatio and Nippon Telegraph positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore Telecommunicatio position performs unexpectedly, Nippon Telegraph 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 Nippon Telegraph will offset losses from the drop in Nippon Telegraph's long position.The idea behind Singapore Telecommunications PK and Nippon Telegraph Telephone 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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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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