Correlation Between Cebu Air and CenterPoint Energy
Can any of the company-specific risk be diversified away by investing in both Cebu Air and CenterPoint Energy 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 CenterPoint Energy 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 CenterPoint Energy, you can compare the effects of market volatilities on Cebu Air and CenterPoint Energy 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 CenterPoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cebu Air and CenterPoint Energy.
Diversification Opportunities for Cebu Air and CenterPoint Energy
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cebu and CenterPoint is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy 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 CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of Cebu Air i.e., Cebu Air and CenterPoint Energy go up and down completely randomly.
Pair Corralation between Cebu Air and CenterPoint Energy
Assuming the 90 days horizon Cebu Air ADR is expected to under-perform the CenterPoint Energy. In addition to that, Cebu Air is 2.31 times more volatile than CenterPoint Energy. It trades about -0.21 of its total potential returns per unit of risk. CenterPoint Energy is currently generating about 0.52 per unit of volatility. If you would invest 2,839 in CenterPoint Energy on September 2, 2024 and sell it today you would earn a total of 423.00 from holding CenterPoint Energy or generate 14.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Cebu Air ADR vs. CenterPoint Energy
Performance |
| Timeline |
| Cebu Air ADR |
| CenterPoint Energy |
Cebu Air and CenterPoint Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cebu Air and CenterPoint Energy
The main advantage of trading using opposite Cebu Air and CenterPoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cebu Air position performs unexpectedly, CenterPoint Energy 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 CenterPoint Energy will offset losses from the drop in CenterPoint Energy'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 |
| CenterPoint Energy vs. DTE Energy | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Ameren Corp | CenterPoint Energy vs. Pinnacle West Capital |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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