Correlation Between Converge Information and Cebu Air

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

By analyzing existing cross correlation between Converge Information Communications and Cebu Air, you can compare the effects of market volatilities on Converge Information and Cebu Air 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 Converge Information with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Converge Information and Cebu Air.

Diversification Opportunities for Converge Information and Cebu Air

0.45

Correlation Coefficient

Converge Information  Cebu Air

Very weak diversification

The 3 months correlation between Converge and Cebu is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Converge Information Communica and Cebu Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air and Converge Information 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 Converge Information Communications are associated (or correlated) with Cebu Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cebu Air has no effect on the direction of Converge Information i.e., Converge Information and Cebu Air go up and down completely randomly.

Pair Corralation between Converge Information and Cebu Air

Assuming the 90 days trading horizon Converge Information Communications is expected to generate 1.29 times more return on investment than Cebu Air. However, Converge Information is 1.29 times more volatile than Cebu Air. It trades about 0.01 of its potential returns per unit of risk. Cebu Air is currently generating about -0.15 per unit of risk. If you would invest  1,648  in Converge Information Communications on September 25, 2024 and sell it today you would lose (10.00) from holding Converge Information Communications or give up 0.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Converge Information Communica  vs.  Cebu Air

Converge Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Converge Information Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Converge Information is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Cebu Air

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cebu Air has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Converge Information and Cebu Air

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

The idea behind Converge Information Communications and Cebu Air 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.