Correlation Between Metro Retail and Cebu Air

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

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

Diversification Opportunities for Metro Retail and Cebu Air

-0.15

Correlation Coefficient

Metro Retail  Cebu Air

Good diversification

The 3 months correlation between Metro and Cebu is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Metro Retail Stores and Cebu Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air and Metro Retail 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 Metro Retail Stores 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 Metro Retail i.e., Metro Retail and Cebu Air go up and down completely randomly.

Pair Corralation between Metro Retail and Cebu Air

Assuming the 90 days trading horizon Metro Retail Stores is expected to generate 0.74 times more return on investment than Cebu Air. However, Metro Retail Stores is 1.35 times less risky than Cebu Air. It trades about 0.04 of its potential returns per unit of risk. Cebu Air is currently generating about -0.22 per unit of risk. If you would invest  117.00  in Metro Retail Stores on September 27, 2024 and sell it today you would earn a total of  3.00  from holding Metro Retail Stores or generate 2.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Metro Retail Stores  vs.  Cebu Air

Metro Retail Stores

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Metro Retail Stores are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Metro Retail is not utilizing all of its potentials. The latest 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 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.

Pair Trading with Metro Retail and Cebu Air

The main advantage of trading using opposite Metro Retail and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Metro Retail 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 Metro Retail Stores 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.