Correlation between equity portfolio against STI

I maintained a Singapore equity portfolio. This blog post looks at the correlation between my portfolio against the Straits Times Index (STI). I tracked market valuation against cost of portfolio (termed as portfolio value) and the STI on that particular date. For example, -1.34% means that portfolio is 1.34% below cost.

Tracking instances Date STI Portfoliovalue (%)
1

31-Jan-13

3282.66

-1.34

2

5-Mar-13

3248.26

-2.33

3

28-Mar-13

3308.10

-2.50

4

3-Apr-13

3321.77

-3.05

5

1-May-13

3368.18

-4.08

6

24-May-13

3393.17

-4.41

7

25-Jun-13

3089.93

-10.83

8

26-Jul-13

3236.10

-6.75

9

23-Aug-13

3088.85

-11.55

10

20-Sep-13

3237.53

-6.71

11

11-Oct-13

3179.71

-7.86

12

31-Oct-13

3210.20

-7.39

Next, I plot a line graph for each column (STI and Portfolio Value).

STI

 

Portfolio valueFor the months of June to October 2013, the shapes of both lines were identical. Simplistically speaking, my equity portfolio was tracking the STI quite closely.

As for January to May 2013. The lines were opposite. The reason is that I started to sell off some blue-chip shares (11 times) to book in gains on sales. The shares remaining in my portfolio were weaker in market valuation and therefore did not correlate in the same fashion as STI.

For the last five months, I knew that my portfolio was moving up and down in tandem with the STI. It is comforting to know that my current selection of stocks is not far off from the benchmark, STI.

Copyright © 2013, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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