Correlation Between Lepanto Consolidated and Cebu Air

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

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

Diversification Opportunities for Lepanto Consolidated and Cebu Air

0.08

Correlation Coefficient

Lepanto Consolidated  Cebu Air

Significant diversification

The 3 months correlation between Lepanto and Cebu is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Lepanto Consolidated Mining and Cebu Air Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air Preferred and Lepanto Consolidated 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 Lepanto Consolidated Mining 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 Preferred has no effect on the direction of Lepanto Consolidated i.e., Lepanto Consolidated and Cebu Air go up and down completely randomly.

Pair Corralation between Lepanto Consolidated and Cebu Air

Assuming the 90 days trading horizon Lepanto Consolidated Mining is expected to generate 2.84 times more return on investment than Cebu Air. However, Lepanto Consolidated is 2.84 times more volatile than Cebu Air Preferred. It trades about 0.04 of its potential returns per unit of risk. Cebu Air Preferred is currently generating about -0.09 per unit of risk. If you would invest  6.60  in Lepanto Consolidated Mining on September 27, 2024 and sell it today you would earn a total of  0.20  from holding Lepanto Consolidated Mining or generate 3.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Lepanto Consolidated Mining  vs.  Cebu Air Preferred

Lepanto Consolidated

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lepanto Consolidated Mining are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Lepanto Consolidated may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cebu Air Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cebu Air Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Lepanto Consolidated and Cebu Air

The main advantage of trading using opposite Lepanto Consolidated and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lepanto Consolidated 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 Lepanto Consolidated Mining and Cebu Air Preferred 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.