Correlation Between Cebu Air and Global Lights

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

Diversification Opportunities for Cebu Air and Global Lights

0.0

Correlation Coefficient

Cebu Air  Global Lights

Pay attention - limited upside

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

Pair Corralation between Cebu Air and Global Lights

If you would invest  1,075  in Global Lights Acquisition on December 19, 2024 and sell it today you would earn a total of  25.00  from holding Global Lights Acquisition or generate 2.33% 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.  Global Lights Acquisition

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Global Lights Acquisition

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Lights Acquisition are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Global Lights is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Cebu Air and Global Lights

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

The idea behind Cebu Air ADR and Global Lights Acquisition 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.