Correlation Between San Miguel and Cebu Air

Can any of the company-specific risk be diversified away by investing in both San Miguel and Cebu Air 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 San Miguel and Cebu Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between San Miguel Pure and Cebu Air Preferred, you can compare the effects of market volatilities on San Miguel and Cebu Air 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 San Miguel with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of San Miguel and Cebu Air.

Diversification Opportunities for San Miguel and Cebu Air

-0.08

Correlation Coefficient

San Miguel  Cebu Air

Good diversification

The 3 months correlation between San and Cebu is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding San Miguel Pure and Cebu Air Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air Preferred and San Miguel 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 San Miguel Pure are associated (or correlated) with Cebu Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cebu Air Preferred has no effect on the direction of San Miguel i.e., San Miguel and Cebu Air go up and down completely randomly.

Pair Corralation between San Miguel and Cebu Air

Assuming the 90 days trading horizon San Miguel Pure is expected to generate 1.16 times more return on investment than Cebu Air. However, San Miguel is 1.16 times more volatile than Cebu Air Preferred. It trades about -0.04 of its potential returns per unit of risk. Cebu Air Preferred is currently generating about -0.22 per unit of risk. If you would invest  5,330  in San Miguel Pure on October 6, 2024 and sell it today you would lose (80.00) from holding San Miguel Pure or give up 1.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	88.24%
Values	Daily Returns

San Miguel Pure  vs.  Cebu Air Preferred

San Miguel Pure

Risk-Adjusted Performance

0 of 100

Very Weak

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

Cebu Air Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cebu Air Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with San Miguel and Cebu Air

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

The idea behind San Miguel Pure and Cebu Air Preferred 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.