Correlation Between Cebu Air and African Agriculture
Can any of the company-specific risk be diversified away by investing in both Cebu Air and African Agriculture 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 Cebu Air and African Agriculture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cebu Air ADR and African Agriculture Holdings, you can compare the effects of market volatilities on Cebu Air and African Agriculture 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 Cebu Air with a short position of African Agriculture. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cebu Air and African Agriculture.
Diversification Opportunities for Cebu Air and African Agriculture
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cebu and African is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and African Agriculture Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on African Agriculture and Cebu Air 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 Cebu Air ADR are associated (or correlated) with African Agriculture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of African Agriculture has no effect on the direction of Cebu Air i.e., Cebu Air and African Agriculture go up and down completely randomly.
Pair Corralation between Cebu Air and African Agriculture
Assuming the 90 days horizon Cebu Air ADR is expected to generate 0.37 times more return on investment than African Agriculture. However, Cebu Air ADR is 2.69 times less risky than African Agriculture. It trades about -0.02 of its potential returns per unit of risk. African Agriculture Holdings is currently generating about -0.1 per unit of risk. If you would invest 366.00 in Cebu Air ADR on September 2, 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 | Moves Together |
| Strength | Weak |
| Accuracy | 90.95% |
| Values | Daily Returns |
Cebu Air ADR vs. African Agriculture Holdings
Performance |
| Timeline |
| Cebu Air ADR |
| African Agriculture |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cebu Air and African Agriculture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cebu Air and African Agriculture
The main advantage of trading using opposite Cebu Air and African Agriculture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cebu Air position performs unexpectedly, African Agriculture 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 African Agriculture will offset losses from the drop in African Agriculture's long position.| Cebu Air vs. Fidus Investment Corp | Cebu Air vs. 51Talk Online Education | Cebu Air vs. Nexstar Broadcasting Group | Cebu Air vs. Evolution Gaming Group |
| African Agriculture vs. Willamette Valley Vineyards | African Agriculture vs. NetEase | African Agriculture vs. Philip Morris International | African Agriculture vs. Keurig Dr Pepper |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |