Correlation Between AirAsia Group and Cebu Air
Can any of the company-specific risk be diversified away by investing in both AirAsia Group 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 AirAsia Group and Cebu Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AirAsia Group Berhad and Cebu Air ADR, you can compare the effects of market volatilities on AirAsia Group 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 AirAsia Group with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of AirAsia Group and Cebu Air.
Diversification Opportunities for AirAsia Group and Cebu Air
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between AirAsia and Cebu is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding AirAsia Group Berhad 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 AirAsia Group 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 AirAsia Group Berhad 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 AirAsia Group i.e., AirAsia Group and Cebu Air go up and down completely randomly.
Pair Corralation between AirAsia Group and Cebu Air
Assuming the 90 days horizon AirAsia Group Berhad is expected to generate 1.97 times more return on investment than Cebu Air. However, AirAsia Group is 1.97 times more volatile than Cebu Air ADR. It trades about 0.05 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 10.00 in AirAsia Group Berhad on August 29, 2024 and sell it today you would earn a total of 10.00 from holding AirAsia Group Berhad or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AirAsia Group Berhad vs. Cebu Air ADR
Performance |
| Timeline |
| AirAsia Group Berhad |
| Cebu Air ADR |
AirAsia Group and Cebu Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AirAsia Group and Cebu Air
The main advantage of trading using opposite AirAsia Group and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AirAsia Group 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.| AirAsia Group vs. Air New Zealand | AirAsia Group vs. ANA Holdings ADR | AirAsia Group vs. Cebu Air | AirAsia Group vs. Air France KLM SA |
| Cebu Air vs. Finnair Oyj | Cebu Air vs. easyJet plc | Cebu Air vs. Norse Atlantic ASA | Cebu Air vs. Air China Limited |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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