Correlation Between Cebu Air and BERKSHIRE

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

Diversification Opportunities for Cebu Air and BERKSHIRE

0.73
  Correlation Coefficient

Poor diversification

The 3 months correlation between Cebu and BERKSHIRE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and BERKSHIRE HATHAWAY ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BERKSHIRE HATHAWAY 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 BERKSHIRE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BERKSHIRE HATHAWAY ENERGY has no effect on the direction of Cebu Air i.e., Cebu Air and BERKSHIRE go up and down completely randomly.

Pair Corralation between Cebu Air and BERKSHIRE

Assuming the 90 days horizon Cebu Air ADR is expected to under-perform the BERKSHIRE. In addition to that, Cebu Air is 5.89 times more volatile than BERKSHIRE HATHAWAY ENERGY. It trades about -0.21 of its total potential returns per unit of risk. BERKSHIRE HATHAWAY ENERGY is currently generating about -0.26 per unit of volatility. If you would invest  9,576  in BERKSHIRE HATHAWAY ENERGY on September 2, 2024 and sell it today you would lose (254.00) from holding BERKSHIRE HATHAWAY ENERGY or give up 2.65% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy90.91%
ValuesDaily Returns

Cebu Air ADR  vs.  BERKSHIRE HATHAWAY ENERGY

 Performance 
       Timeline  
Cebu Air ADR 

Risk-Adjusted Performance

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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 uncertain 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.
BERKSHIRE HATHAWAY ENERGY 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BERKSHIRE HATHAWAY ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BERKSHIRE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cebu Air and BERKSHIRE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cebu Air and BERKSHIRE

The main advantage of trading using opposite Cebu Air and BERKSHIRE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cebu Air position performs unexpectedly, BERKSHIRE 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 BERKSHIRE will offset losses from the drop in BERKSHIRE's long position.
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The idea behind Cebu Air ADR and BERKSHIRE HATHAWAY ENERGY 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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