Correlation Between Cebu Air and Century Pacific

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

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

Diversification Opportunities for Cebu Air and Century Pacific

-0.25

Correlation Coefficient

Cebu Air  Century Pacific

Very good diversification

The 3 months correlation between Cebu and Century is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air Preferred and Century Pacific Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Pacific Food 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 Preferred are associated (or correlated) with Century Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Pacific Food has no effect on the direction of Cebu Air i.e., Cebu Air and Century Pacific go up and down completely randomly.

Pair Corralation between Cebu Air and Century Pacific

Assuming the 90 days trading horizon Cebu Air Preferred is expected to under-perform the Century Pacific. But the stock apears to be less risky and, when comparing its historical volatility, Cebu Air Preferred is 1.01 times less risky than Century Pacific. The stock trades about -0.02 of its potential returns per unit of risk. The Century Pacific Food is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,850  in Century Pacific Food on September 24, 2024 and sell it today you would earn a total of  285.00  from holding Century Pacific Food or generate 7.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.69%
Values	Daily Returns

Cebu Air Preferred  vs.  Century Pacific Food

Cebu Air Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cebu Air Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Cebu Air is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Century Pacific Food

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Century Pacific Food are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Century Pacific may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cebu Air and Century Pacific

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

The idea behind Cebu Air Preferred and Century Pacific Food 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.