Correlation Between Air China and Cebu Air
Can any of the company-specific risk be diversified away by investing in both Air China 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 China 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 China Limited and Cebu Air, you can compare the effects of market volatilities on Air China 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 China with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and Cebu Air.
Diversification Opportunities for Air China and Cebu Air
Pay attention - limited upside
The 3 months correlation between Air and Cebu is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Air China Limited and Cebu Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air and Air China 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 China Limited 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 Air China i.e., Air China and Cebu Air go up and down completely randomly.
Pair Corralation between Air China and Cebu Air
If you would invest 50.00 in Air China Limited on August 28, 2024 and sell it today you would earn a total of 9.00 from holding Air China Limited or generate 18.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Air China Limited vs. Cebu Air
Performance |
| Timeline |
| Air China Limited |
| Cebu Air |
Air China and Cebu Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and Cebu Air
The main advantage of trading using opposite Air China and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China 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 China vs. Cebu Air | Air China vs. Finnair Oyj | Air China vs. easyJet plc | Air China vs. Norse Atlantic ASA |
| Cebu Air vs. Air France KLM SA | 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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