Correlation Between Singapore Telecommunicatio and Volkswagen
Can any of the company-specific risk be diversified away by investing in both Singapore Telecommunicatio and Volkswagen 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 Volkswagen 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 Volkswagen AG, you can compare the effects of market volatilities on Singapore Telecommunicatio and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Singapore Telecommunicatio and Volkswagen.
Diversification Opportunities for Singapore Telecommunicatio and Volkswagen
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Singapore and Volkswagen is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Telecommunications L and Volkswagen AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG has no effect on the direction of Singapore Telecommunicatio i.e., Singapore Telecommunicatio and Volkswagen go up and down completely randomly.
Pair Corralation between Singapore Telecommunicatio and Volkswagen
Assuming the 90 days trading horizon Singapore Telecommunications Limited is expected to generate 0.96 times more return on investment than Volkswagen. However, Singapore Telecommunications Limited is 1.04 times less risky than Volkswagen. It trades about 0.08 of its potential returns per unit of risk. Volkswagen AG is currently generating about -0.05 per unit of risk. If you would invest 159.00 in Singapore Telecommunications Limited on September 14, 2024 and sell it today you would earn a total of 56.00 from holding Singapore Telecommunications Limited or generate 35.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Singapore Telecommunications L vs. Volkswagen AG
Performance |
| Timeline |
| Singapore Telecommunicatio |
| Volkswagen AG |
Singapore Telecommunicatio and Volkswagen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Singapore Telecommunicatio and Volkswagen
The main advantage of trading using opposite Singapore Telecommunicatio and Volkswagen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore Telecommunicatio position performs unexpectedly, Volkswagen 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 Volkswagen will offset losses from the drop in Volkswagen's long position.The idea behind Singapore Telecommunications Limited and Volkswagen 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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