Correlation Between Cebu Air and RCS MediaGroup

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

Diversification Opportunities for Cebu Air and RCS MediaGroup

-0.62

Correlation Coefficient

Cebu Air  RCS MediaGroup

Excellent diversification

The 3 months correlation between Cebu and RCS is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and RCS MediaGroup SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCS MediaGroup SpA 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 RCS MediaGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCS MediaGroup SpA has no effect on the direction of Cebu Air i.e., Cebu Air and RCS MediaGroup go up and down completely randomly.

Pair Corralation between Cebu Air and RCS MediaGroup

Assuming the 90 days horizon Cebu Air ADR is expected to under-perform the RCS MediaGroup. In addition to that, Cebu Air is 1.38 times more volatile than RCS MediaGroup SpA. It trades about -0.12 of its total potential returns per unit of risk. RCS MediaGroup SpA is currently generating about 0.15 per unit of volatility. If you would invest  83.00  in RCS MediaGroup SpA on September 17, 2024 and sell it today you would earn a total of  10.00  from holding RCS MediaGroup SpA or generate 12.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Cebu Air ADR  vs.  RCS MediaGroup SpA

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 uncertain 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.

RCS MediaGroup SpA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCS MediaGroup SpA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, RCS MediaGroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cebu Air and RCS MediaGroup

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

The idea behind Cebu Air ADR and RCS MediaGroup SpA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.