Correlation Between International Consolidated and Singapore Airlines

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

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

Diversification Opportunities for International Consolidated and Singapore Airlines

0.1

Correlation Coefficient

International Consolidated  Singapore Airlines

Average diversification

The 3 months correlation between International and Singapore is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding International Consolidated Air and Singapore Airlines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Airlines and International Consolidated 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 International Consolidated Airlines are associated (or correlated) with Singapore Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Airlines has no effect on the direction of International Consolidated i.e., International Consolidated and Singapore Airlines go up and down completely randomly.

Pair Corralation between International Consolidated and Singapore Airlines

Assuming the 90 days horizon International Consolidated Airlines is expected to generate 1.75 times more return on investment than Singapore Airlines. However, International Consolidated is 1.75 times more volatile than Singapore Airlines Limited. It trades about 0.27 of its potential returns per unit of risk. Singapore Airlines Limited is currently generating about 0.07 per unit of risk. If you would invest  217.00  in International Consolidated Airlines on September 4, 2024 and sell it today you would earn a total of  94.00  from holding International Consolidated Airlines or generate 43.32% return on investment over 90 days.

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

International Consolidated Air  vs.  Singapore Airlines Limited

International Consolidated

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in International Consolidated Airlines are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, International Consolidated reported solid returns over the last few months and may actually be approaching a breakup point.

Singapore Airlines

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Airlines Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Singapore Airlines is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with International Consolidated and Singapore Airlines

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

The idea behind International Consolidated Airlines and Singapore Airlines 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.