Correlation Between Singapore Technologies and BAE Systems
Can any of the company-specific risk be diversified away by investing in both Singapore Technologies and BAE Systems 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 Technologies and BAE Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Singapore Technologies Engineering and BAE Systems PLC, you can compare the effects of market volatilities on Singapore Technologies and BAE Systems 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 Technologies with a short position of BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singapore Technologies and BAE Systems.
Diversification Opportunities for Singapore Technologies and BAE Systems
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Singapore and BAE is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Technologies Enginee and BAE Systems PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAE Systems PLC and Singapore Technologies 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 Technologies Engineering are associated (or correlated) with BAE Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAE Systems PLC has no effect on the direction of Singapore Technologies i.e., Singapore Technologies and BAE Systems go up and down completely randomly.
Pair Corralation between Singapore Technologies and BAE Systems
Assuming the 90 days horizon Singapore Technologies is expected to generate 1.76 times less return on investment than BAE Systems. But when comparing it to its historical volatility, Singapore Technologies Engineering is 1.26 times less risky than BAE Systems. It trades about 0.06 of its potential returns per unit of risk. BAE Systems PLC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,617 in BAE Systems PLC on August 31, 2024 and sell it today you would earn a total of 63.00 from holding BAE Systems PLC or generate 3.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Singapore Technologies Enginee vs. BAE Systems PLC
Performance |
| Timeline |
| Singapore Technologies |
| BAE Systems PLC |
Singapore Technologies and BAE Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Singapore Technologies and BAE Systems
The main advantage of trading using opposite Singapore Technologies and BAE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore Technologies position performs unexpectedly, BAE Systems 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 BAE Systems will offset losses from the drop in BAE Systems' long position.| Singapore Technologies vs. Firan Technology Group | Singapore Technologies vs. 808 Renewable Energy | Singapore Technologies vs. Park Electrochemical | Singapore Technologies vs. Innovative Solutions and |
| BAE Systems vs. Huntington Ingalls Industries | BAE Systems vs. Rheinmetall AG ADR | BAE Systems vs. Airbus Group NV | BAE Systems vs. General Dynamics |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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