Correlation Between Figaro Coffee and Cebu Air

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

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

Diversification Opportunities for Figaro Coffee and Cebu Air

-0.39

Correlation Coefficient

Figaro Coffee  Cebu Air

Very good diversification

The 3 months correlation between Figaro and Cebu is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Figaro Coffee Group 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 Figaro Coffee 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 Figaro Coffee Group 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 Figaro Coffee i.e., Figaro Coffee and Cebu Air go up and down completely randomly.

Pair Corralation between Figaro Coffee and Cebu Air

Assuming the 90 days trading horizon Figaro Coffee Group is expected to under-perform the Cebu Air. In addition to that, Figaro Coffee is 1.6 times more volatile than Cebu Air Preferred. It trades about -0.09 of its total potential returns per unit of risk. Cebu Air Preferred is currently generating about 0.07 per unit of volatility. If you would invest  3,500  in Cebu Air Preferred on December 30, 2024 and sell it today you would earn a total of  205.00  from holding Cebu Air Preferred or generate 5.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.32%
Values	Daily Returns

Figaro Coffee Group  vs.  Cebu Air Preferred

Figaro Coffee Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Figaro Coffee Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Cebu Air Preferred

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cebu Air Preferred are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Cebu Air may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Figaro Coffee and Cebu Air

The main advantage of trading using opposite Figaro Coffee and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Figaro Coffee 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 Figaro Coffee Group 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.