Correlation Between Union Bank and Cebu Air

Can any of the company-specific risk be diversified away by investing in both Union 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 Union 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 Union Bank of and Cebu Air Preferred, you can compare the effects of market volatilities on Union 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 Union Bank with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Bank and Cebu Air.

Diversification Opportunities for Union Bank and Cebu Air

0.62

Correlation Coefficient

Union Bank  Cebu Air

Poor diversification

The 3 months correlation between Union and Cebu is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Union Bank of 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 Union 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 Union Bank of 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 Union Bank i.e., Union Bank and Cebu Air go up and down completely randomly.

Pair Corralation between Union Bank and Cebu Air

Assuming the 90 days trading horizon Union Bank of is expected to generate 1.02 times more return on investment than Cebu Air. However, Union Bank is 1.02 times more volatile than Cebu Air Preferred. It trades about 0.03 of its potential returns per unit of risk. Cebu Air Preferred is currently generating about 0.01 per unit of risk. If you would invest  3,520  in Union Bank of on September 15, 2024 and sell it today you would earn a total of  75.00  from holding Union Bank of or generate 2.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	87.5%
Values	Daily Returns

Union Bank of  vs.  Cebu Air Preferred

Union Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Union Bank of are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Union Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 relatively invariable fundamental drivers, Cebu Air is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Union Bank and Cebu Air

The main advantage of trading using opposite Union Bank and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union 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 Union Bank of 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.