Correlation Between XMReality and Cebu Air

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

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

Diversification Opportunities for XMReality and Cebu Air

0.0

Correlation Coefficient

XMReality  Cebu Air

Pay attention - limited upside

The 3 months correlation between XMReality and Cebu is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding XMReality AB 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 XMReality 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 XMReality AB 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 XMReality i.e., XMReality and Cebu Air go up and down completely randomly.

Pair Corralation between XMReality and Cebu Air

Assuming the 90 days horizon XMReality AB is expected to under-perform the Cebu Air. In addition to that, XMReality is 1.63 times more volatile than Cebu Air ADR. It trades about -0.06 of its total potential returns per unit of risk. Cebu Air ADR is currently generating about -0.02 per unit of volatility. If you would invest  366.00  in Cebu Air ADR on September 24, 2024 and sell it today you would lose (181.00) from holding Cebu Air ADR or give up 49.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

XMReality AB  vs.  Cebu Air ADR

XMReality AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XMReality AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, XMReality is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the 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 inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with XMReality and Cebu Air

The main advantage of trading using opposite XMReality and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XMReality 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 XMReality AB 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.