Correlation Between Cebu Air and Lithium Americas

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

Diversification Opportunities for Cebu Air and Lithium Americas

0.0

Correlation Coefficient

Cebu Air  Lithium Americas

Pay attention - limited upside

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

Pair Corralation between Cebu Air and Lithium Americas

If you would invest (100.00) in Lithium Americas Corp on December 20, 2024 and sell it today you would earn a total of  100.00  from holding Lithium Americas Corp or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Cebu Air ADR  vs.  Lithium Americas Corp

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

Lithium Americas Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lithium Americas Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Lithium Americas is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cebu Air and Lithium Americas

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

The idea behind Cebu Air ADR and Lithium Americas 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.