Correlation Between Euronext and Singapore Exchange

Can any of the company-specific risk be diversified away by investing in both Euronext and Singapore Exchange 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 Euronext and Singapore Exchange into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Euronext NV and Singapore Exchange Limited, you can compare the effects of market volatilities on Euronext and Singapore Exchange 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 Euronext with a short position of Singapore Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Euronext and Singapore Exchange.

Diversification Opportunities for Euronext and Singapore Exchange

0.19

Correlation Coefficient

Euronext  Singapore Exchange

Average diversification

The 3 months correlation between Euronext and Singapore is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Euronext NV and Singapore Exchange Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Exchange and Euronext 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 Euronext NV are associated (or correlated) with Singapore Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Exchange has no effect on the direction of Euronext i.e., Euronext and Singapore Exchange go up and down completely randomly.

Pair Corralation between Euronext and Singapore Exchange

Assuming the 90 days horizon Euronext NV is expected to under-perform the Singapore Exchange. But the pink sheet apears to be less risky and, when comparing its historical volatility, Euronext NV is 2.13 times less risky than Singapore Exchange. The pink sheet trades about -0.01 of its potential returns per unit of risk. The Singapore Exchange Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  843.00  in Singapore Exchange Limited on September 30, 2024 and sell it today you would earn a total of  48.00  from holding Singapore Exchange Limited or generate 5.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Euronext NV  vs.  Singapore Exchange Limited

Euronext NV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Singapore Exchange

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Exchange Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Singapore Exchange may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Euronext and Singapore Exchange

The main advantage of trading using opposite Euronext and Singapore Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Euronext position performs unexpectedly, Singapore Exchange 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 Singapore Exchange will offset losses from the drop in Singapore Exchange's long position.

The idea behind Euronext NV and Singapore Exchange Limited 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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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.