Correlation Between Asiabest Group and Cebu Air

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

By analyzing existing cross correlation between Asiabest Group International and Cebu Air, you can compare the effects of market volatilities on Asiabest Group and Cebu Air 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 Asiabest Group with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asiabest Group and Cebu Air.

Diversification Opportunities for Asiabest Group and Cebu Air

-0.81

Correlation Coefficient

Asiabest Group  Cebu Air

Pay attention - limited upside

The 3 months correlation between Asiabest and Cebu is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Asiabest Group International and Cebu Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air and Asiabest Group 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 Asiabest Group International are associated (or correlated) with Cebu Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cebu Air has no effect on the direction of Asiabest Group i.e., Asiabest Group and Cebu Air go up and down completely randomly.

Pair Corralation between Asiabest Group and Cebu Air

Assuming the 90 days trading horizon Asiabest Group International is expected to generate 5.85 times more return on investment than Cebu Air. However, Asiabest Group is 5.85 times more volatile than Cebu Air. It trades about 0.46 of its potential returns per unit of risk. Cebu Air is currently generating about -0.21 per unit of risk. If you would invest  1,878  in Asiabest Group International on September 26, 2024 and sell it today you would earn a total of  742.00  from holding Asiabest Group International or generate 39.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	50.0%
Values	Daily Returns

Asiabest Group International  vs.  Cebu Air

Asiabest Group Inter

Risk-Adjusted Performance

0 of 100

Excellent

Over the last 90 days Asiabest Group International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady technical and fundamental indicators, Asiabest Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cebu Air

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cebu Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Asiabest Group and Cebu Air

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

The idea behind Asiabest Group International and Cebu Air 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.