Correlation Between SINGAPORE AIRLINES and British American
Can any of the company-specific risk be diversified away by investing in both SINGAPORE AIRLINES and British American 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 British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SINGAPORE AIRLINES and British American Tobacco, you can compare the effects of market volatilities on SINGAPORE AIRLINES and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of SINGAPORE AIRLINES and British American.
Diversification Opportunities for SINGAPORE AIRLINES and British American
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SINGAPORE and British is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding SINGAPORE AIRLINES and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 are associated (or correlated) with British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of SINGAPORE AIRLINES i.e., SINGAPORE AIRLINES and British American go up and down completely randomly.
Pair Corralation between SINGAPORE AIRLINES and British American
Assuming the 90 days trading horizon SINGAPORE AIRLINES is expected to generate 0.92 times more return on investment than British American. However, SINGAPORE AIRLINES is 1.09 times less risky than British American. It trades about 0.19 of its potential returns per unit of risk. British American Tobacco is currently generating about -0.09 per unit of risk. If you would invest 441.00 in SINGAPORE AIRLINES on October 1, 2024 and sell it today you would earn a total of 11.00 from holding SINGAPORE AIRLINES or generate 2.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SINGAPORE AIRLINES vs. British American Tobacco
Performance |
| Timeline |
| SINGAPORE AIRLINES |
| British American Tobacco |
SINGAPORE AIRLINES and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SINGAPORE AIRLINES and British American
The main advantage of trading using opposite SINGAPORE AIRLINES and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SINGAPORE AIRLINES position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.The idea behind SINGAPORE AIRLINES and British American Tobacco 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.| British American vs. CANON MARKETING JP | British American vs. VULCAN MATERIALS | British American vs. NEWELL RUBBERMAID | British American vs. Canon Marketing Japan |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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