Correlation Between Artisan Partners and Cebu Air

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

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

Diversification Opportunities for Artisan Partners and Cebu Air

-0.82

Correlation Coefficient

Artisan Partners  Cebu Air

Pay attention - limited upside

The 3 months correlation between Artisan and Cebu is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Artisan Partners Asset and Cebu Air ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air ADR and Artisan Partners 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 Artisan Partners Asset 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 ADR has no effect on the direction of Artisan Partners i.e., Artisan Partners and Cebu Air go up and down completely randomly.

Pair Corralation between Artisan Partners and Cebu Air

Given the investment horizon of 90 days Artisan Partners Asset is expected to generate 0.56 times more return on investment than Cebu Air. However, Artisan Partners Asset is 1.78 times less risky than Cebu Air. It trades about 0.06 of its potential returns per unit of risk. Cebu Air ADR is currently generating about -0.02 per unit of risk. If you would invest  2,654  in Artisan Partners Asset on September 22, 2024 and sell it today you would earn a total of  1,720  from holding Artisan Partners Asset or generate 64.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Artisan Partners Asset  vs.  Cebu Air ADR

Artisan Partners Asset

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Artisan Partners Asset are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Artisan Partners is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Cebu Air ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cebu Air ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Artisan Partners and Cebu Air

The main advantage of trading using opposite Artisan Partners and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Artisan Partners 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 Artisan Partners Asset and Cebu Air ADR 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.