Correlation Between Cebu Air and AerSale Corp

Can any of the company-specific risk be diversified away by investing in both Cebu Air and AerSale Corp 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 AerSale Corp 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 AerSale Corp, you can compare the effects of market volatilities on Cebu Air and AerSale Corp 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 AerSale Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cebu Air and AerSale Corp.

Diversification Opportunities for Cebu Air and AerSale Corp

-0.89

Correlation Coefficient

Cebu Air  AerSale Corp

Pay attention - limited upside

The 3 months correlation between Cebu and AerSale is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and AerSale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AerSale Corp 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 AerSale Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AerSale Corp has no effect on the direction of Cebu Air i.e., Cebu Air and AerSale Corp go up and down completely randomly.

Pair Corralation between Cebu Air and AerSale Corp

Assuming the 90 days horizon Cebu Air ADR is expected to under-perform the AerSale Corp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Cebu Air ADR is 1.67 times less risky than AerSale Corp. The pink sheet trades about -0.12 of its potential returns per unit of risk. The AerSale Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  513.00  in AerSale Corp on September 12, 2024 and sell it today you would earn a total of  116.00  from holding AerSale Corp or generate 22.61% return on investment over 90 days.

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

Cebu Air ADR  vs.  AerSale Corp

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 fragile 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.

AerSale Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AerSale Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, AerSale Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cebu Air and AerSale Corp

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

The idea behind Cebu Air ADR and AerSale Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.