Correlation Between Cebu Air and Ares Acquisition

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

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

Diversification Opportunities for Cebu Air and Ares Acquisition

-0.78

Correlation Coefficient

Cebu Air  Ares Acquisition

Pay attention - limited upside

The 3 months correlation between Cebu and Ares is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and Ares Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Acquisition 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 ADR are associated (or correlated) with Ares Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Acquisition has no effect on the direction of Cebu Air i.e., Cebu Air and Ares Acquisition go up and down completely randomly.

Pair Corralation between Cebu Air and Ares Acquisition

Assuming the 90 days horizon Cebu Air ADR is expected to under-perform the Ares Acquisition. In addition to that, Cebu Air is 14.02 times more volatile than Ares Acquisition. It trades about -0.12 of its total potential returns per unit of risk. Ares Acquisition is currently generating about 0.17 per unit of volatility. If you would invest  1,080  in Ares Acquisition on September 23, 2024 and sell it today you would earn a total of  15.00  from holding Ares Acquisition or generate 1.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Cebu Air ADR  vs.  Ares Acquisition

Cebu Air ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cebu Air ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ares Acquisition

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Acquisition are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Ares Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cebu Air and Ares Acquisition

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

The idea behind Cebu Air ADR and Ares Acquisition 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.