Correlation Between GT Capital and Cebu Air

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

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

Diversification Opportunities for GT Capital and Cebu Air

0.1

Correlation Coefficient

GT Capital  Cebu Air

Average diversification

The 3 months correlation between GTCAP and Cebu is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding GT Capital Holdings 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 GT Capital 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 GT Capital Holdings 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 GT Capital i.e., GT Capital and Cebu Air go up and down completely randomly.

Pair Corralation between GT Capital and Cebu Air

Assuming the 90 days trading horizon GT Capital Holdings is expected to under-perform the Cebu Air. In addition to that, GT Capital is 1.33 times more volatile than Cebu Air Preferred. It trades about -0.19 of its total potential returns per unit of risk. Cebu Air Preferred is currently generating about -0.01 per unit of volatility. If you would invest  3,710  in Cebu Air Preferred on December 2, 2024 and sell it today you would lose (40.00) from holding Cebu Air Preferred or give up 1.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.67%
Values	Daily Returns

GT Capital Holdings  vs.  Cebu Air Preferred

GT Capital Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days GT Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Cebu Air Preferred

Risk-Adjusted Performance

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 relatively invariable fundamental drivers, Cebu Air is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with GT Capital and Cebu Air

The main advantage of trading using opposite GT Capital and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GT Capital 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 GT Capital Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.