Correlation Between Cebu Air and DDMP REIT

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

By analyzing existing cross correlation between Cebu Air and DDMP REIT, you can compare the effects of market volatilities on Cebu Air and DDMP REIT 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 DDMP REIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cebu Air and DDMP REIT.

Diversification Opportunities for Cebu Air and DDMP REIT

0.15

Correlation Coefficient

Cebu Air  DDMP REIT

Average diversification

The 3 months correlation between Cebu and DDMP is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air and DDMP REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DDMP REIT 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 DDMP REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DDMP REIT has no effect on the direction of Cebu Air i.e., Cebu Air and DDMP REIT go up and down completely randomly.

Pair Corralation between Cebu Air and DDMP REIT

Assuming the 90 days trading horizon Cebu Air is expected to under-perform the DDMP REIT. In addition to that, Cebu Air is 1.12 times more volatile than DDMP REIT. It trades about -0.24 of its total potential returns per unit of risk. DDMP REIT is currently generating about 0.17 per unit of volatility. If you would invest  100.00  in DDMP REIT on September 27, 2024 and sell it today you would earn a total of  4.00  from holding DDMP REIT or generate 4.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cebu Air  vs.  DDMP REIT

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 weak 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.

DDMP REIT

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DDMP REIT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, DDMP REIT is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Cebu Air and DDMP REIT

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

The idea behind Cebu Air and DDMP REIT 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.