Correlation Between Cebu Air and Mediag3

Can any of the company-specific risk be diversified away by investing in both Cebu Air and Mediag3 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 Mediag3 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 Mediag3, you can compare the effects of market volatilities on Cebu Air and Mediag3 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 Mediag3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cebu Air and Mediag3.

Diversification Opportunities for Cebu Air and Mediag3

-1.0

Correlation Coefficient

Cebu Air  Mediag3

Pay attention - limited upside

The 3 months correlation between Cebu and Mediag3 is -1.0. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and Mediag3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mediag3 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 Mediag3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mediag3 has no effect on the direction of Cebu Air i.e., Cebu Air and Mediag3 go up and down completely randomly.

Pair Corralation between Cebu Air and Mediag3

If you would invest  0.01  in Mediag3 on December 20, 2024 and sell it today you would earn a total of  0.00  from holding Mediag3 or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Strong
Accuracy	93.65%
Values	Daily Returns

Cebu Air ADR  vs.  Mediag3

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.

Mediag3

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mediag3 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Mediag3 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 Mediag3

The main advantage of trading using opposite Cebu Air and Mediag3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cebu Air position performs unexpectedly, Mediag3 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 Mediag3 will offset losses from the drop in Mediag3's long position.

The idea behind Cebu Air ADR and Mediag3 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.