Correlation Between Cebu Air and United Utilities
Can any of the company-specific risk be diversified away by investing in both Cebu Air and United Utilities 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 United Utilities 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 United Utilities Group, you can compare the effects of market volatilities on Cebu Air and United Utilities 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 United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cebu Air and United Utilities.
Diversification Opportunities for Cebu Air and United Utilities
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cebu and United is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air ADR and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Cebu Air i.e., Cebu Air and United Utilities go up and down completely randomly.
Pair Corralation between Cebu Air and United Utilities
Assuming the 90 days horizon Cebu Air ADR is expected to under-perform the United Utilities. In addition to that, Cebu Air is 1.67 times more volatile than United Utilities Group. It trades about -0.02 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.03 per unit of volatility. If you would invest 1,270 in United Utilities Group on September 13, 2024 and sell it today you would earn a total of 124.00 from holding United Utilities Group or generate 9.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 61.82% |
| Values | Daily Returns |
Cebu Air ADR vs. United Utilities Group
Performance |
| Timeline |
| Cebu Air ADR |
| United Utilities |
Cebu Air and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cebu Air and United Utilities
The main advantage of trading using opposite Cebu Air and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cebu Air position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' long position.| Cebu Air vs. Finnair Oyj | Cebu Air vs. easyJet plc | Cebu Air vs. Norse Atlantic ASA | Cebu Air vs. Air New Zealand |
| United Utilities vs. Artesian Resources | United Utilities vs. Global Water Resources | United Utilities vs. Essential Utilities | United Utilities vs. American Water Works |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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