Correlation Between Cebu Air and FLUOR

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

Diversification Opportunities for Cebu Air and FLUOR

0.13

Correlation Coefficient

Cebu Air  FLUOR

Average diversification

The 3 months correlation between Cebu and FLUOR is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and FLUOR P NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FLUOR P NEW 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 FLUOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FLUOR P NEW has no effect on the direction of Cebu Air i.e., Cebu Air and FLUOR go up and down completely randomly.

Pair Corralation between Cebu Air and FLUOR

Assuming the 90 days horizon Cebu Air ADR is expected to under-perform the FLUOR. In addition to that, Cebu Air is 4.34 times more volatile than FLUOR P NEW. It trades about -0.12 of its total potential returns per unit of risk. FLUOR P NEW is currently generating about -0.11 per unit of volatility. If you would invest  9,945  in FLUOR P NEW on September 17, 2024 and sell it today you would lose (259.00) from holding FLUOR P NEW or give up 2.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.85%
Values	Daily Returns

Cebu Air ADR  vs.  FLUOR P NEW

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.

FLUOR P NEW

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FLUOR P NEW has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FLUOR is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cebu Air and FLUOR

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

The idea behind Cebu Air ADR and FLUOR P NEW 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.