Correlation Between Intercontinental and Singapore Exchange

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

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

Diversification Opportunities for Intercontinental and Singapore Exchange

-0.09

Correlation Coefficient

Intercontinental  Singapore Exchange

Good diversification

The 3 months correlation between Intercontinental and Singapore is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Intercontinental Exchange and Singapore Exchange Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Exchange and Intercontinental 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 Intercontinental Exchange 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 Intercontinental i.e., Intercontinental and Singapore Exchange go up and down completely randomly.

Pair Corralation between Intercontinental and Singapore Exchange

Considering the 90-day investment horizon Intercontinental Exchange is expected to under-perform the Singapore Exchange. But the stock apears to be less risky and, when comparing its historical volatility, Intercontinental Exchange is 2.53 times less risky than Singapore Exchange. The stock trades about -0.24 of its potential returns per unit of risk. The Singapore Exchange Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  860.00  in Singapore Exchange Limited on September 19, 2024 and sell it today you would earn a total of  30.00  from holding Singapore Exchange Limited or generate 3.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Intercontinental Exchange  vs.  Singapore Exchange Limited

Intercontinental Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intercontinental Exchange has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Intercontinental is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Singapore Exchange

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Intercontinental and Singapore Exchange

The main advantage of trading using opposite Intercontinental and Singapore Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intercontinental 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 Intercontinental Exchange 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.