Correlation Between Singapore Telecommunicatio and AEGEAN AIRLINES
Can any of the company-specific risk be diversified away by investing in both Singapore Telecommunicatio and AEGEAN AIRLINES 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 AEGEAN AIRLINES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Singapore Telecommunications Limited and AEGEAN AIRLINES, you can compare the effects of market volatilities on Singapore Telecommunicatio and AEGEAN AIRLINES 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 AEGEAN AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singapore Telecommunicatio and AEGEAN AIRLINES.
Diversification Opportunities for Singapore Telecommunicatio and AEGEAN AIRLINES
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Singapore and AEGEAN is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Telecommunications L and AEGEAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEGEAN AIRLINES 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 Limited are associated (or correlated) with AEGEAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEGEAN AIRLINES has no effect on the direction of Singapore Telecommunicatio i.e., Singapore Telecommunicatio and AEGEAN AIRLINES go up and down completely randomly.
Pair Corralation between Singapore Telecommunicatio and AEGEAN AIRLINES
Assuming the 90 days trading horizon Singapore Telecommunicatio is expected to generate 1.15 times less return on investment than AEGEAN AIRLINES. But when comparing it to its historical volatility, Singapore Telecommunications Limited is 1.26 times less risky than AEGEAN AIRLINES. It trades about 0.07 of its potential returns per unit of risk. AEGEAN AIRLINES is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 660.00 in AEGEAN AIRLINES on November 29, 2024 and sell it today you would earn a total of 419.00 from holding AEGEAN AIRLINES or generate 63.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Singapore Telecommunications L vs. AEGEAN AIRLINES
Performance |
| Timeline |
| Singapore Telecommunicatio |
| AEGEAN AIRLINES |
Singapore Telecommunicatio and AEGEAN AIRLINES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Singapore Telecommunicatio and AEGEAN AIRLINES
The main advantage of trading using opposite Singapore Telecommunicatio and AEGEAN AIRLINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore Telecommunicatio position performs unexpectedly, AEGEAN AIRLINES 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 AEGEAN AIRLINES will offset losses from the drop in AEGEAN AIRLINES's long position.The idea behind Singapore Telecommunications Limited and AEGEAN AIRLINES 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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