Correlation Between Cebu Air and Top Frontier

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

Diversification Opportunities for Cebu Air and Top Frontier

-0.2

Correlation Coefficient

Cebu Air  Top Frontier

Good diversification

The 3 months correlation between Cebu and Top is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air Preferred and Top Frontier Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Frontier Investment 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 Top Frontier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Frontier Investment has no effect on the direction of Cebu Air i.e., Cebu Air and Top Frontier go up and down completely randomly.

Pair Corralation between Cebu Air and Top Frontier

Assuming the 90 days trading horizon Cebu Air Preferred is expected to generate 0.45 times more return on investment than Top Frontier. However, Cebu Air Preferred is 2.21 times less risky than Top Frontier. It trades about 0.07 of its potential returns per unit of risk. Top Frontier Investment is currently generating about -0.05 per unit of risk. If you would invest  3,575  in Cebu Air Preferred on August 31, 2024 and sell it today you would earn a total of  250.00  from holding Cebu Air Preferred or generate 6.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.33%
Values	Daily Returns

Cebu Air Preferred  vs.  Top Frontier Investment

Cebu Air Preferred

Risk-Adjusted Performance

5 of 100

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 December 2024.

Top Frontier Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Top Frontier Investment 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 basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Cebu Air and Top Frontier

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

The idea behind Cebu Air Preferred and Top Frontier Investment 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.