Correlation Between Air France-KLM and Cebu Air
Can any of the company-specific risk be diversified away by investing in both Air France-KLM 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 Air France-KLM and Cebu Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air France KLM SA and Cebu Air ADR, you can compare the effects of market volatilities on Air France-KLM 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 Air France-KLM with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air France-KLM and Cebu Air.
Diversification Opportunities for Air France-KLM and Cebu Air
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Air and Cebu is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Air France KLM SA 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 Air France-KLM 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 Air France KLM SA 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 Air France-KLM i.e., Air France-KLM and Cebu Air go up and down completely randomly.
Pair Corralation between Air France-KLM and Cebu Air
Assuming the 90 days horizon Air France KLM SA is expected to generate 43.36 times more return on investment than Cebu Air. However, Air France-KLM is 43.36 times more volatile than Cebu Air ADR. It trades about 0.16 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 1,840 in Air France KLM SA on August 26, 2024 and sell it today you would lose (1,043) from holding Air France KLM SA or give up 56.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.72% |
| Values | Daily Returns |
Air France KLM SA vs. Cebu Air ADR
Performance |
| Timeline |
| Air France KLM |
| Cebu Air ADR |
Air France-KLM and Cebu Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air France-KLM and Cebu Air
The main advantage of trading using opposite Air France-KLM and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air France-KLM 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.| Air France-KLM vs. Cebu Air | Air France-KLM vs. easyJet plc | Air France-KLM vs. Norse Atlantic ASA | Air France-KLM vs. Air China Limited |
| Cebu Air vs. Air China Limited | Cebu Air vs. Air France KLM SA | Cebu Air vs. AirAsia Group Berhad | Cebu Air vs. China Southern Airlines |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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