Correlation Between Jollibee Foods and Cebu Air

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Can any of the company-specific risk be diversified away by investing in both Jollibee Foods 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 Jollibee Foods and Cebu Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Jollibee Foods Corp and Cebu Air, you can compare the effects of market volatilities on Jollibee Foods 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 Jollibee Foods with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jollibee Foods and Cebu Air.

Diversification Opportunities for Jollibee Foods and Cebu Air

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Jollibee and Cebu is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Jollibee Foods Corp and Cebu Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air and Jollibee Foods 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 Jollibee Foods Corp 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 Jollibee Foods i.e., Jollibee Foods and Cebu Air go up and down completely randomly.

Pair Corralation between Jollibee Foods and Cebu Air

Assuming the 90 days trading horizon Jollibee Foods Corp is expected to generate 1.02 times more return on investment than Cebu Air. However, Jollibee Foods is 1.02 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 -0.18 per unit of risk. If you would invest  26,818  in Jollibee Foods Corp on September 26, 2024 and sell it today you would earn a total of  2.00  from holding Jollibee Foods Corp or generate 0.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Jollibee Foods Corp  vs.  Cebu Air

 Performance 
       Timeline  
Jollibee Foods Corp 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days Jollibee Foods Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Jollibee Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Cebu Air 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 weak 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.

Jollibee Foods and Cebu Air Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Jollibee Foods and Cebu Air

The main advantage of trading using opposite Jollibee Foods and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jollibee Foods 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 Jollibee Foods Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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