Correlation Between Cebu Air and Unum

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

Diversification Opportunities for Cebu Air and Unum

0.29

Correlation Coefficient

Cebu Air  Unum

Modest diversification

The 3 months correlation between Cebu and Unum is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and Unum Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unum Group 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 Unum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unum Group has no effect on the direction of Cebu Air i.e., Cebu Air and Unum go up and down completely randomly.

Pair Corralation between Cebu Air and Unum

Assuming the 90 days horizon Cebu Air ADR is expected to under-perform the Unum. In addition to that, Cebu Air is 3.21 times more volatile than Unum Group. It trades about -0.12 of its total potential returns per unit of risk. Unum Group is currently generating about -0.01 per unit of volatility. If you would invest  2,513  in Unum Group on September 12, 2024 and sell it today you would lose (11.00) from holding Unum Group or give up 0.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cebu Air ADR  vs.  Unum Group

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Unum Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cebu Air and Unum

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

The idea behind Cebu Air ADR and Unum Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.