Correlation Between Cebu Air and Asia United

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

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

Diversification Opportunities for Cebu Air and Asia United

-0.58

Correlation Coefficient

Cebu Air  Asia United

Excellent diversification

The 3 months correlation between Cebu and Asia is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air and Asia United Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia United Bank and Cebu Air 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 Cebu Air are associated (or correlated) with Asia United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia United Bank has no effect on the direction of Cebu Air i.e., Cebu Air and Asia United go up and down completely randomly.

Pair Corralation between Cebu Air and Asia United

Assuming the 90 days trading horizon Cebu Air is expected to generate 7.23 times less return on investment than Asia United. In addition to that, Cebu Air is 1.14 times more volatile than Asia United Bank. It trades about 0.03 of its total potential returns per unit of risk. Asia United Bank is currently generating about 0.22 per unit of volatility. If you would invest  3,984  in Asia United Bank on September 29, 2024 and sell it today you would earn a total of  2,166  from holding Asia United Bank or generate 54.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cebu Air  vs.  Asia United Bank

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.

Asia United Bank

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Asia United Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Asia United exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cebu Air and Asia United

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

The idea behind Cebu Air and Asia United Bank 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.