Correlation Between Cebu Air and Ramaco Resources

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

Diversification Opportunities for Cebu Air and Ramaco Resources

-0.18

Correlation Coefficient

Cebu Air  Ramaco Resources

Good diversification

The 3 months correlation between Cebu and Ramaco is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and Ramaco Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ramaco Resources 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 Ramaco Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ramaco Resources has no effect on the direction of Cebu Air i.e., Cebu Air and Ramaco Resources go up and down completely randomly.

Pair Corralation between Cebu Air and Ramaco Resources

Assuming the 90 days horizon Cebu Air ADR is expected to under-perform the Ramaco Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Cebu Air ADR is 1.15 times less risky than Ramaco Resources. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Ramaco Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  890.00  in Ramaco Resources on October 25, 2024 and sell it today you would earn a total of  31.00  from holding Ramaco Resources or generate 3.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.89%
Values	Daily Returns

Cebu Air ADR  vs.  Ramaco Resources

Cebu Air ADR

Risk-Adjusted Performance

0 of 100

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 fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ramaco Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ramaco Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Ramaco Resources is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cebu Air and Ramaco Resources

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

The idea behind Cebu Air ADR and Ramaco Resources 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.