Correlation Between JAPAN EX and SINGAPORE EXUNSPADR15

Can any of the company-specific risk be diversified away by investing in both JAPAN EX and SINGAPORE EXUNSPADR15 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 JAPAN EX and SINGAPORE EXUNSPADR15 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JAPAN EX UNADR and SINGAPORE EXUNSPADR15, you can compare the effects of market volatilities on JAPAN EX and SINGAPORE EXUNSPADR15 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 JAPAN EX with a short position of SINGAPORE EXUNSPADR15. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN EX and SINGAPORE EXUNSPADR15.

Diversification Opportunities for JAPAN EX and SINGAPORE EXUNSPADR15

0.1

Correlation Coefficient

JAPAN EX  SINGAPORE EXUNSPADR15

Average diversification

The 3 months correlation between JAPAN and SINGAPORE is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN EX UNADR and SINGAPORE EXUNSPADR15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SINGAPORE EXUNSPADR15 and JAPAN EX 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 JAPAN EX UNADR are associated (or correlated) with SINGAPORE EXUNSPADR15. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SINGAPORE EXUNSPADR15 has no effect on the direction of JAPAN EX i.e., JAPAN EX and SINGAPORE EXUNSPADR15 go up and down completely randomly.

Pair Corralation between JAPAN EX and SINGAPORE EXUNSPADR15

Assuming the 90 days trading horizon JAPAN EX UNADR is expected to under-perform the SINGAPORE EXUNSPADR15. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN EX UNADR is 1.1 times less risky than SINGAPORE EXUNSPADR15. The stock trades about -0.04 of its potential returns per unit of risk. The SINGAPORE EXUNSPADR15 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,423  in SINGAPORE EXUNSPADR15 on September 26, 2024 and sell it today you would earn a total of  217.00  from holding SINGAPORE EXUNSPADR15 or generate 15.25% return on investment over 90 days.

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

JAPAN EX UNADR  vs.  SINGAPORE EXUNSPADR15

JAPAN EX UNADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

SINGAPORE EXUNSPADR15

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SINGAPORE EXUNSPADR15 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SINGAPORE EXUNSPADR15 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JAPAN EX and SINGAPORE EXUNSPADR15

The main advantage of trading using opposite JAPAN EX and SINGAPORE EXUNSPADR15 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN EX position performs unexpectedly, SINGAPORE EXUNSPADR15 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 EXUNSPADR15 will offset losses from the drop in SINGAPORE EXUNSPADR15's long position.

The idea behind JAPAN EX UNADR and SINGAPORE EXUNSPADR15 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.