Correlation Between Cebu Air and Jaws Hurricane

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Can any of the company-specific risk be diversified away by investing in both Cebu Air and Jaws Hurricane 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 Jaws Hurricane 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 Jaws Hurricane Acquisition, you can compare the effects of market volatilities on Cebu Air and Jaws Hurricane 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 Jaws Hurricane. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cebu Air and Jaws Hurricane.

Diversification Opportunities for Cebu Air and Jaws Hurricane

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Cebu and Jaws is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and Jaws Hurricane Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jaws Hurricane Acqui 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 Jaws Hurricane. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jaws Hurricane Acqui has no effect on the direction of Cebu Air i.e., Cebu Air and Jaws Hurricane go up and down completely randomly.

Pair Corralation between Cebu Air and Jaws Hurricane

Assuming the 90 days horizon Cebu Air ADR is expected to under-perform the Jaws Hurricane. But the pink sheet apears to be less risky and, when comparing its historical volatility, Cebu Air ADR is 8.96 times less risky than Jaws Hurricane. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Jaws Hurricane Acquisition is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Jaws Hurricane Acquisition on September 3, 2024 and sell it today you would lose (12.90) from holding Jaws Hurricane Acquisition or give up 99.23% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy18.7%
ValuesDaily Returns

Cebu Air ADR  vs.  Jaws Hurricane Acquisition

 Performance 
       Timeline  
Cebu Air ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Cebu Air ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Jaws Hurricane Acqui 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Jaws Hurricane Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Jaws Hurricane is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Cebu Air and Jaws Hurricane Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cebu Air and Jaws Hurricane

The main advantage of trading using opposite Cebu Air and Jaws Hurricane positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cebu Air position performs unexpectedly, Jaws Hurricane 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 Jaws Hurricane will offset losses from the drop in Jaws Hurricane's long position.
The idea behind Cebu Air ADR and Jaws Hurricane Acquisition pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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