Correlation Between Cebu Air and Figaro Coffee

Can any of the company-specific risk be diversified away by investing in both Cebu Air and Figaro Coffee 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 Figaro Coffee 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 Figaro Coffee Group, you can compare the effects of market volatilities on Cebu Air and Figaro Coffee 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 Figaro Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cebu Air and Figaro Coffee.

Diversification Opportunities for Cebu Air and Figaro Coffee

-0.39

Correlation Coefficient

Cebu Air  Figaro Coffee

Very good diversification

The 3 months correlation between Cebu and Figaro is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air Preferred and Figaro Coffee Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Figaro Coffee Group 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 Figaro Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Figaro Coffee Group has no effect on the direction of Cebu Air i.e., Cebu Air and Figaro Coffee go up and down completely randomly.

Pair Corralation between Cebu Air and Figaro Coffee

Assuming the 90 days trading horizon Cebu Air Preferred is expected to generate 0.63 times more return on investment than Figaro Coffee. However, Cebu Air Preferred is 1.6 times less risky than Figaro Coffee. It trades about 0.07 of its potential returns per unit of risk. Figaro Coffee Group is currently generating about -0.09 per unit of risk. If you would invest  3,500  in Cebu Air Preferred on December 30, 2024 and sell it today you would earn a total of  205.00  from holding Cebu Air Preferred or generate 5.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.32%
Values	Daily Returns

Cebu Air Preferred  vs.  Figaro Coffee Group

Cebu Air Preferred

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cebu Air Preferred are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Cebu Air may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Figaro Coffee Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Figaro Coffee Group 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Cebu Air and Figaro Coffee

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

The idea behind Cebu Air Preferred and Figaro Coffee Group 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..