Correlation Between Puregold Price and Cebu Air

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

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

Diversification Opportunities for Puregold Price and Cebu Air

0.81

Correlation Coefficient

Puregold Price  Cebu Air

Very poor diversification

The 3 months correlation between Puregold and Cebu is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Puregold Price Club 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 Puregold Price 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 Puregold Price Club 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 Puregold Price i.e., Puregold Price and Cebu Air go up and down completely randomly.

Pair Corralation between Puregold Price and Cebu Air

Assuming the 90 days trading horizon Puregold Price Club is expected to generate 1.11 times more return on investment than Cebu Air. However, Puregold Price is 1.11 times more volatile than Cebu Air Preferred. It trades about 0.07 of its potential returns per unit of risk. Cebu Air Preferred is currently generating about 0.04 per unit of risk. If you would invest  2,815  in Puregold Price Club on September 4, 2024 and sell it today you would earn a total of  255.00  from holding Puregold Price Club or generate 9.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.48%
Values	Daily Returns

Puregold Price Club  vs.  Cebu Air Preferred

Puregold Price Club

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days Puregold Price Club has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively weak basic indicators, Puregold Price may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cebu Air Preferred

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cebu Air Preferred are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Puregold Price and Cebu Air

The main advantage of trading using opposite Puregold Price and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Puregold Price 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 Puregold Price Club 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.