Correlation Between Singapore Airlines and Cebu Air

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

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

Diversification Opportunities for Singapore Airlines and Cebu Air

0.5

Correlation Coefficient

Singapore Airlines  Cebu Air

Very weak diversification

The 3 months correlation between Singapore and Cebu is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Singapore Airlines and Cebu Air ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air ADR and Singapore Airlines 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 Singapore Airlines 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 ADR has no effect on the direction of Singapore Airlines i.e., Singapore Airlines and Cebu Air go up and down completely randomly.

Pair Corralation between Singapore Airlines and Cebu Air

Assuming the 90 days horizon Singapore Airlines is expected to generate 2.21 times more return on investment than Cebu Air. However, Singapore Airlines is 2.21 times more volatile than Cebu Air ADR. It trades about 0.04 of its potential returns per unit of risk. Cebu Air ADR is currently generating about -0.02 per unit of risk. If you would invest  373.00  in Singapore Airlines on October 22, 2024 and sell it today you would earn a total of  77.00  from holding Singapore Airlines or generate 20.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.33%
Values	Daily Returns

Singapore Airlines  vs.  Cebu Air ADR

Singapore Airlines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Singapore Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Singapore Airlines and Cebu Air

The main advantage of trading using opposite Singapore Airlines and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Singapore Airlines 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 Singapore Airlines and Cebu Air ADR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .