Correlation Between Cebu Air and BRNPB

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

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

Diversification Opportunities for Cebu Air and BRNPB

-0.41

Correlation Coefficient

Cebu Air  BRNPB

Very good diversification

The 3 months correlation between Cebu and BRNPB is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air Preferred and BRNPB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRNPB and Cebu Air 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 Cebu Air Preferred are associated (or correlated) with BRNPB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRNPB has no effect on the direction of Cebu Air i.e., Cebu Air and BRNPB go up and down completely randomly.

Pair Corralation between Cebu Air and BRNPB

If you would invest  3,310  in Cebu Air Preferred on October 9, 2024 and sell it today you would earn a total of  485.00  from holding Cebu Air Preferred or generate 14.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.0%
Values	Daily Returns

Cebu Air Preferred  vs.  BRNPB

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.

BRNPB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRNPB has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, BRNPB 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 Cebu Air and BRNPB

The main advantage of trading using opposite Cebu Air and BRNPB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cebu Air position performs unexpectedly, BRNPB 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 BRNPB will offset losses from the drop in BRNPB's long position.

The idea behind Cebu Air Preferred and BRNPB 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.