Correlation Between Cebu Air and Lepanto Consolidated

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

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

Diversification Opportunities for Cebu Air and Lepanto Consolidated

-0.14

Correlation Coefficient

Cebu Air  Lepanto Consolidated

Good diversification

The 3 months correlation between Cebu and Lepanto is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air and Lepanto Consolidated Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lepanto Consolidated 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 Lepanto Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lepanto Consolidated has no effect on the direction of Cebu Air i.e., Cebu Air and Lepanto Consolidated go up and down completely randomly.

Pair Corralation between Cebu Air and Lepanto Consolidated

Assuming the 90 days trading horizon Cebu Air is expected to under-perform the Lepanto Consolidated. But the stock apears to be less risky and, when comparing its historical volatility, Cebu Air is 2.96 times less risky than Lepanto Consolidated. The stock trades about -0.22 of its potential returns per unit of risk. The Lepanto Consolidated Mining is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6.60  in Lepanto Consolidated Mining on September 27, 2024 and sell it today you would earn a total of  0.20  from holding Lepanto Consolidated Mining or generate 3.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.26%
Values	Daily Returns

Cebu Air  vs.  Lepanto Consolidated Mining

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.

Lepanto Consolidated

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lepanto Consolidated Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Lepanto Consolidated may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cebu Air and Lepanto Consolidated

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

The idea behind Cebu Air and Lepanto Consolidated Mining 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.

Check out your portfolio center.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.