Correlation Between Cebu Air and GT Capital

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

Diversification Opportunities for Cebu Air and GT Capital

-0.26

Correlation Coefficient

Cebu Air  GT Capital

Very good diversification

The 3 months correlation between Cebu and GTPPB is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air Preferred and GT Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GT Capital Holdings 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 GT Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GT Capital Holdings has no effect on the direction of Cebu Air i.e., Cebu Air and GT Capital go up and down completely randomly.

Pair Corralation between Cebu Air and GT Capital

Assuming the 90 days trading horizon Cebu Air is expected to generate 6.12 times less return on investment than GT Capital. But when comparing it to its historical volatility, Cebu Air Preferred is 1.13 times less risky than GT Capital. It trades about 0.01 of its potential returns per unit of risk. GT Capital Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  94,752  in GT Capital Holdings on September 15, 2024 and sell it today you would earn a total of  1,348  from holding GT Capital Holdings or generate 1.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.21%
Values	Daily Returns

Cebu Air Preferred  vs.  GT Capital Holdings

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.

GT Capital Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GT Capital Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, GT Capital 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 GT Capital

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

The idea behind Cebu Air Preferred and GT Capital Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.