Correlation Between Cebu Air and Jollibee Foods

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

Diversification Opportunities for Cebu Air and Jollibee Foods

0.37

Correlation Coefficient

Cebu Air  Jollibee Foods

Weak diversification

The 3 months correlation between Cebu and Jollibee is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air Preferred and Jollibee Foods Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jollibee Foods Corp 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 Jollibee Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jollibee Foods Corp has no effect on the direction of Cebu Air i.e., Cebu Air and Jollibee Foods go up and down completely randomly.

Pair Corralation between Cebu Air and Jollibee Foods

Assuming the 90 days trading horizon Cebu Air Preferred is expected to generate 1.52 times more return on investment than Jollibee Foods. However, Cebu Air is 1.52 times more volatile than Jollibee Foods Corp. It trades about 0.06 of its potential returns per unit of risk. Jollibee Foods Corp is currently generating about -0.31 per unit of risk. If you would invest  3,585  in Cebu Air Preferred on October 22, 2024 and sell it today you would earn a total of  55.00  from holding Cebu Air Preferred or generate 1.53% return on investment over 90 days.

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

Cebu Air Preferred  vs.  Jollibee Foods Corp

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.

Jollibee Foods Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jollibee Foods Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Cebu Air and Jollibee Foods

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

The idea behind Cebu Air Preferred and Jollibee Foods Corp 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.