Correlation Between Singapore Airlines and Stora Enso

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

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

Diversification Opportunities for Singapore Airlines and Stora Enso

0.09

Correlation Coefficient

Singapore Airlines  Stora Enso

Significant diversification

The 3 months correlation between Singapore and Stora is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Airlines Limited and Stora Enso Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stora Enso Oyj and Singapore Airlines 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 Airlines Limited are associated (or correlated) with Stora Enso. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stora Enso Oyj has no effect on the direction of Singapore Airlines i.e., Singapore Airlines and Stora Enso go up and down completely randomly.

Pair Corralation between Singapore Airlines and Stora Enso

Assuming the 90 days trading horizon Singapore Airlines Limited is expected to generate 0.66 times more return on investment than Stora Enso. However, Singapore Airlines Limited is 1.53 times less risky than Stora Enso. It trades about -0.04 of its potential returns per unit of risk. Stora Enso Oyj is currently generating about -0.16 per unit of risk. If you would invest  465.00  in Singapore Airlines Limited on September 29, 2024 and sell it today you would lose (16.00) from holding Singapore Airlines Limited or give up 3.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Singapore Airlines Limited  vs.  Stora Enso Oyj

Singapore Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Singapore Airlines Limited has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Stora Enso Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stora Enso Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Singapore Airlines and Stora Enso

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

The idea behind Singapore Airlines Limited and Stora Enso Oyj 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.