Correlation Between AMCON Distributing and Cebu Air

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

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

Diversification Opportunities for AMCON Distributing and Cebu Air

0.35

Correlation Coefficient

AMCON Distributing  Cebu Air

Weak diversification

The 3 months correlation between AMCON and Cebu is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding AMCON Distributing and Cebu Air ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air ADR and AMCON Distributing 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 AMCON Distributing 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 ADR has no effect on the direction of AMCON Distributing i.e., AMCON Distributing and Cebu Air go up and down completely randomly.

Pair Corralation between AMCON Distributing and Cebu Air

Considering the 90-day investment horizon AMCON Distributing is expected to generate 2.2 times less return on investment than Cebu Air. But when comparing it to its historical volatility, AMCON Distributing is 1.1 times less risky than Cebu Air. It trades about 0.03 of its potential returns per unit of risk. Cebu Air ADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  150.00  in Cebu Air ADR on September 15, 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 Together
Strength	Very Weak
Accuracy	97.64%
Values	Daily Returns

AMCON Distributing  vs.  Cebu Air ADR

AMCON Distributing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMCON Distributing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, AMCON Distributing is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with AMCON Distributing and Cebu Air

The main advantage of trading using opposite AMCON Distributing and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AMCON Distributing 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 AMCON Distributing and Cebu Air ADR 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 CEOs Directory module to screen CEOs from public companies around the world.