Correlation Between Singapore Telecommunicatio and Summit Hotel
Can any of the company-specific risk be diversified away by investing in both Singapore Telecommunicatio and Summit Hotel 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 Summit Hotel 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 Summit Hotel Properties, you can compare the effects of market volatilities on Singapore Telecommunicatio and Summit Hotel 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 Summit Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singapore Telecommunicatio and Summit Hotel.
Diversification Opportunities for Singapore Telecommunicatio and Summit Hotel
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Singapore and Summit is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Telecommunications L and Summit Hotel Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Hotel Properties 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 Summit Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Hotel Properties has no effect on the direction of Singapore Telecommunicatio i.e., Singapore Telecommunicatio and Summit Hotel go up and down completely randomly.
Pair Corralation between Singapore Telecommunicatio and Summit Hotel
Assuming the 90 days trading horizon Singapore Telecommunications Limited is expected to generate 0.77 times more return on investment than Summit Hotel. However, Singapore Telecommunications Limited is 1.31 times less risky than Summit Hotel. It trades about 0.04 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.02 per unit of risk. If you would invest 163.00 in Singapore Telecommunications Limited on September 13, 2024 and sell it today you would earn a total of 52.00 from holding Singapore Telecommunications Limited or generate 31.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Singapore Telecommunications L vs. Summit Hotel Properties
Performance |
| Timeline |
| Singapore Telecommunicatio |
| Summit Hotel Properties |
Singapore Telecommunicatio and Summit Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Singapore Telecommunicatio and Summit Hotel
The main advantage of trading using opposite Singapore Telecommunicatio and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore Telecommunicatio position performs unexpectedly, Summit Hotel 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 Summit Hotel will offset losses from the drop in Summit Hotel's long position.The idea behind Singapore Telecommunications Limited and Summit Hotel Properties 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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