Correlation Between Visa and Singapore Exchange

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

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

Diversification Opportunities for Visa and Singapore Exchange

-0.17

Correlation Coefficient

Visa  Singapore Exchange

Good diversification

The 3 months correlation between Visa and Singapore is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and Singapore Exchange Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Exchange and Visa 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 Visa Class A 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 Visa i.e., Visa and Singapore Exchange go up and down completely randomly.

Pair Corralation between Visa and Singapore Exchange

Taking into account the 90-day investment horizon Visa is expected to generate 130.23 times less return on investment than Singapore Exchange. But when comparing it to its historical volatility, Visa Class A is 94.93 times less risky than Singapore Exchange. It trades about 0.11 of its potential returns per unit of risk. Singapore Exchange Ltd is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,620  in Singapore Exchange Ltd on September 21, 2024 and sell it today you would earn a total of  208.00  from holding Singapore Exchange Ltd or generate 12.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Visa Class A  vs.  Singapore Exchange Ltd

Visa Class A

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Singapore Exchange

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Singapore Exchange Ltd are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Singapore Exchange showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Visa and Singapore Exchange

The main advantage of trading using opposite Visa and Singapore Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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 Visa Class A and Singapore Exchange Ltd 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.