Correlation Between East Africa and Cebu Air
Can any of the company-specific risk be diversified away by investing in both East Africa and Cebu Air 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 East Africa and Cebu Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between East Africa Metals and Cebu Air ADR, you can compare the effects of market volatilities on East Africa and Cebu Air 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 East Africa with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of East Africa and Cebu Air.
Diversification Opportunities for East Africa and Cebu Air
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between East and Cebu is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and Cebu Air ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air ADR and East Africa 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 East Africa Metals are associated (or correlated) with Cebu Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cebu Air ADR has no effect on the direction of East Africa i.e., East Africa and Cebu Air go up and down completely randomly.
Pair Corralation between East Africa and Cebu Air
Assuming the 90 days horizon East Africa Metals is expected to generate 4.53 times more return on investment than Cebu Air. However, East Africa is 4.53 times more volatile than Cebu Air ADR. It trades about 0.07 of its potential returns per unit of risk. Cebu Air ADR is currently generating about 0.06 per unit of risk. If you would invest 6.26 in East Africa Metals on September 1, 2024 and sell it today you would earn a total of 4.74 from holding East Africa Metals or generate 75.72% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
East Africa Metals vs. Cebu Air ADR
Performance |
Timeline |
East Africa Metals |
Cebu Air ADR |
East Africa and Cebu Air Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with East Africa and Cebu Air
The main advantage of trading using opposite East Africa and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa position performs unexpectedly, Cebu Air 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 Cebu Air will offset losses from the drop in Cebu Air's long position.East Africa vs. Pasinex Resources Limited | East Africa vs. Commander Resources | East Africa vs. Forsys Metals Corp | East Africa vs. American CuMo Mining |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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