Correlation Between Singapore Airlines and Metro AG

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Can any of the company-specific risk be diversified away by investing in both Singapore Airlines and Metro AG 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 Airlines and Metro AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Singapore Airlines Limited and Metro AG, you can compare the effects of market volatilities on Singapore Airlines and Metro AG 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 Airlines with a short position of Metro AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singapore Airlines and Metro AG.

Diversification Opportunities for Singapore Airlines and Metro AG

0.17
  Correlation Coefficient

Average diversification

The 3 months correlation between Singapore and Metro is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Airlines Limited and Metro AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro AG and Singapore Airlines 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 Airlines Limited are associated (or correlated) with Metro AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro AG has no effect on the direction of Singapore Airlines i.e., Singapore Airlines and Metro AG go up and down completely randomly.

Pair Corralation between Singapore Airlines and Metro AG

Assuming the 90 days trading horizon Singapore Airlines Limited is expected to generate 0.26 times more return on investment than Metro AG. However, Singapore Airlines Limited is 3.91 times less risky than Metro AG. It trades about 0.08 of its potential returns per unit of risk. Metro AG is currently generating about -0.21 per unit of risk. If you would invest  441.00  in Singapore Airlines Limited on September 24, 2024 and sell it today you would earn a total of  4.00  from holding Singapore Airlines Limited or generate 0.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Singapore Airlines Limited  vs.  Metro AG

 Performance 
       Timeline  
Singapore Airlines 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Singapore Airlines Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Singapore Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Metro AG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Metro AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Singapore Airlines and Metro AG Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Singapore Airlines and Metro AG

The main advantage of trading using opposite Singapore Airlines and Metro AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore Airlines position performs unexpectedly, Metro AG 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 Metro AG will offset losses from the drop in Metro AG's long position.
The idea behind Singapore Airlines Limited and Metro AG 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.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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