Correlation Between Premiere Entertainment and Cebu Air

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

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

Diversification Opportunities for Premiere Entertainment and Cebu Air

0.43

Correlation Coefficient

Premiere Entertainment  Cebu Air

Very weak diversification

The 3 months correlation between Premiere and Cebu is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Premiere Entertainment and Cebu Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air and Premiere Entertainment 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 Premiere Entertainment 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 Premiere Entertainment i.e., Premiere Entertainment and Cebu Air go up and down completely randomly.

Pair Corralation between Premiere Entertainment and Cebu Air

Assuming the 90 days trading horizon Premiere Entertainment is expected to generate 2.12 times more return on investment than Cebu Air. However, Premiere Entertainment is 2.12 times more volatile than Cebu Air. It trades about 0.04 of its potential returns per unit of risk. Cebu Air is currently generating about -0.15 per unit of risk. If you would invest  17.00  in Premiere Entertainment on September 25, 2024 and sell it today you would earn a total of  1.00  from holding Premiere Entertainment or generate 5.88% return on investment over 90 days.

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

Premiere Entertainment  vs.  Cebu Air

Premiere Entertainment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Premiere Entertainment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Premiere Entertainment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Premiere Entertainment and Cebu Air

The main advantage of trading using opposite Premiere Entertainment and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premiere Entertainment 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 Premiere Entertainment 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.