Correlation Between East West and Cebu Air
Can any of the company-specific risk be diversified away by investing in both East West 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 West 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 West Banking and Cebu Air Preferred, you can compare the effects of market volatilities on East West 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 West with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of East West and Cebu Air.
Diversification Opportunities for East West and Cebu Air
Modest diversification
The 3 months correlation between East and Cebu is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding East West Banking and Cebu Air Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cebu Air Preferred and East West 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 West Banking 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 Preferred has no effect on the direction of East West i.e., East West and Cebu Air go up and down completely randomly.
Pair Corralation between East West and Cebu Air
Assuming the 90 days trading horizon East West Banking is expected to generate 0.63 times more return on investment than Cebu Air. However, East West Banking is 1.59 times less risky than Cebu Air. It trades about 0.07 of its potential returns per unit of risk. Cebu Air Preferred is currently generating about 0.04 per unit of risk. If you would invest 824.00 in East West Banking on November 3, 2024 and sell it today you would earn a total of 156.00 from holding East West Banking or generate 18.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 88.75% |
| Values | Daily Returns |
East West Banking vs. Cebu Air Preferred
Performance |
| Timeline |
| East West Banking |
| Cebu Air Preferred |
East West and Cebu Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with East West and Cebu Air
The main advantage of trading using opposite East West and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East West 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 West vs. Metro Retail Stores | East West vs. Robinsons Retail Holdings | East West vs. Jollibee Foods Corp | East West vs. Semirara Mining Corp |
| Cebu Air vs. Apex Mining Co | Cebu Air vs. Atlas Consolidated Mining | Cebu Air vs. East West Banking | Cebu Air vs. Transpacific Broadband Group |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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