Correlation Between Cebu Air and Rivian Automotive

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

Diversification Opportunities for Cebu Air and Rivian Automotive

-0.43

Correlation Coefficient

Cebu Air  Rivian Automotive

Very good diversification

The 3 months correlation between Cebu and Rivian is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and Rivian Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rivian Automotive 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 Rivian Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rivian Automotive has no effect on the direction of Cebu Air i.e., Cebu Air and Rivian Automotive go up and down completely randomly.

Pair Corralation between Cebu Air and Rivian Automotive

Assuming the 90 days horizon Cebu Air ADR is expected to generate 0.93 times more return on investment than Rivian Automotive. However, Cebu Air ADR is 1.07 times less risky than Rivian Automotive. It trades about 0.06 of its potential returns per unit of risk. Rivian Automotive is currently generating about 0.01 per unit of risk. If you would invest  150.00  in Cebu Air ADR on September 24, 2024 and sell it today you would earn a total of  35.00  from holding Cebu Air ADR or generate 23.33% return on investment over 90 days.

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

Cebu Air ADR  vs.  Rivian Automotive

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.

Rivian Automotive

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rivian Automotive are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Rivian Automotive displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cebu Air and Rivian Automotive

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

The idea behind Cebu Air ADR and Rivian Automotive 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.