Correlation Between Cebu Air and Air Lease

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

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

Diversification Opportunities for Cebu Air and Air Lease

0.0

Correlation Coefficient

Cebu Air  Air Lease

Pay attention - limited upside

The 3 months correlation between Cebu and Air is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and Air Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Lease 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 ADR are associated (or correlated) with Air Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Lease has no effect on the direction of Cebu Air i.e., Cebu Air and Air Lease go up and down completely randomly.

Pair Corralation between Cebu Air and Air Lease

If you would invest  4,867  in Air Lease on December 27, 2024 and sell it today you would earn a total of  35.00  from holding Air Lease or generate 0.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Cebu Air ADR  vs.  Air Lease

Cebu Air ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cebu Air ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Cebu Air is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Air Lease

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Air Lease are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Air Lease is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Cebu Air and Air Lease

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

The idea behind Cebu Air ADR and Air Lease 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.