Correlation Between Security Bank and Cebu Air

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

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

Diversification Opportunities for Security Bank and Cebu Air

0.82

Correlation Coefficient

Security Bank  Cebu Air

Very poor diversification

The 3 months correlation between Security and Cebu is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Security Bank Corp and Cebu Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air and Security Bank 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 Security Bank 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 Security Bank i.e., Security Bank and Cebu Air go up and down completely randomly.

Pair Corralation between Security Bank and Cebu Air

Assuming the 90 days trading horizon Security Bank Corp is expected to generate 1.56 times more return on investment than Cebu Air. However, Security Bank is 1.56 times more volatile than Cebu Air. It trades about -0.02 of its potential returns per unit of risk. Cebu Air is currently generating about -0.21 per unit of risk. If you would invest  8,900  in Security Bank Corp on September 25, 2024 and sell it today you would lose (100.00) from holding Security Bank Corp or give up 1.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Security Bank Corp  vs.  Cebu Air

Security Bank Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Security Bank Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Security Bank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private 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 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 Security Bank and Cebu Air

The main advantage of trading using opposite Security Bank and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Security Bank 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 Security Bank 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 Stocks Directory module to find actively traded stocks across global markets.