Correlation Between Cebu Air and Fomento Economico
Can any of the company-specific risk be diversified away by investing in both Cebu Air and Fomento Economico 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 Fomento Economico 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 Fomento Economico Mexicano, you can compare the effects of market volatilities on Cebu Air and Fomento Economico 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 Fomento Economico. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cebu Air and Fomento Economico.
Diversification Opportunities for Cebu Air and Fomento Economico
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cebu and Fomento is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and Fomento Economico Mexicano in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fomento Economico 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 Fomento Economico. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fomento Economico has no effect on the direction of Cebu Air i.e., Cebu Air and Fomento Economico go up and down completely randomly.
Pair Corralation between Cebu Air and Fomento Economico
Assuming the 90 days horizon Cebu Air ADR is expected to under-perform the Fomento Economico. In addition to that, Cebu Air is 2.04 times more volatile than Fomento Economico Mexicano. It trades about -0.02 of its total potential returns per unit of risk. Fomento Economico Mexicano is currently generating about 0.03 per unit of volatility. If you would invest 7,448 in Fomento Economico Mexicano on August 30, 2024 and sell it today you would earn a total of 1,133 from holding Fomento Economico Mexicano or generate 15.21% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Cebu Air ADR vs. Fomento Economico Mexicano
Performance |
Timeline |
Cebu Air ADR |
Fomento Economico |
Cebu Air and Fomento Economico Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Cebu Air and Fomento Economico
The main advantage of trading using opposite Cebu Air and Fomento Economico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cebu Air position performs unexpectedly, Fomento Economico 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 Fomento Economico will offset losses from the drop in Fomento Economico's long position.Cebu Air vs. Finnair Oyj | Cebu Air vs. easyJet plc | Cebu Air vs. Norse Atlantic ASA | Cebu Air vs. AirAsia Group Berhad |
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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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