Correlation Between Ayala Corp and Cebu Air
Can any of the company-specific risk be diversified away by investing in both Ayala Corp 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 Ayala Corp and Cebu Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ayala Corp and Cebu Air, you can compare the effects of market volatilities on Ayala Corp 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 Ayala Corp with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ayala Corp and Cebu Air.
Diversification Opportunities for Ayala Corp and Cebu Air
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ayala and Cebu is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Ayala Corp and Cebu Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air and Ayala Corp 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 Ayala Corp 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 has no effect on the direction of Ayala Corp i.e., Ayala Corp and Cebu Air go up and down completely randomly.
Pair Corralation between Ayala Corp and Cebu Air
Assuming the 90 days trading horizon Ayala Corp is expected to generate 1.19 times more return on investment than Cebu Air. However, Ayala Corp is 1.19 times more volatile than Cebu Air. It trades about -0.2 of its potential returns per unit of risk. Cebu Air is currently generating about -0.26 per unit of risk. If you would invest 72,000 in Ayala Corp on August 24, 2024 and sell it today you would lose (7,800) from holding Ayala Corp or give up 10.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ayala Corp vs. Cebu Air
Performance |
| Timeline |
| Ayala Corp |
| Cebu Air |
Ayala Corp and Cebu Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ayala Corp and Cebu Air
The main advantage of trading using opposite Ayala Corp and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ayala Corp 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.| Ayala Corp vs. Apex Mining Co | Ayala Corp vs. Allhome Corp | Ayala Corp vs. Century Pacific Food | Ayala Corp vs. Alliance Select Foods |
| Cebu Air vs. SM Investments Corp | Cebu Air vs. Robinsons Retail Holdings | Cebu Air vs. Alliance Select Foods | Cebu Air vs. Philippine Business Bank |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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