The start of the Chinese New Year is driving the notion that risk and return on assets are directly correlated. This is apparent as Singapore-listed Reits (real estate investment trusts) have recorded conservative returns year-to-date, amid their reputation as defensive counters given their lower price volatility.
Data released by the Singapore Exchange (SGX) and Bloomberg reveal that Reits have brought in 8.2 percent of returns, compared to the 15.5 percent of stocks that Straits Times Index (STI) raked in over the same period.
The Reits, which comprised 22 locally listed counters, had an average price volatility of 19.9 percent while STI stocks achieved 29.6 percent.
Generally, it is perceived that higher risk associated to an asset also reflects greater upside potential, and vice versa. Before making investment decisions, investors usually estimate the level of risk that is associated with the counter. This is achieved by measuring its recent volatility in price.
However, SGX maintains that variations of risk and return may be possible among various asset classes. For instance, risk and return may vary depending on fundamentals and pricing of each asset.
Historical prices and volatility figures also do not guarantee future performance, as history may not accurately represent the future. Related Stories:
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