Correlation Between Transpacific Broadband and Cebu Air
Can any of the company-specific risk be diversified away by investing in both Transpacific Broadband 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 Transpacific Broadband and Cebu Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transpacific Broadband Group and Cebu Air Preferred, you can compare the effects of market volatilities on Transpacific Broadband 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 Transpacific Broadband with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transpacific Broadband and Cebu Air.
Diversification Opportunities for Transpacific Broadband and Cebu Air
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Transpacific and Cebu is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Transpacific Broadband Group 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 Transpacific Broadband 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 Transpacific Broadband Group 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 Transpacific Broadband i.e., Transpacific Broadband and Cebu Air go up and down completely randomly.
Pair Corralation between Transpacific Broadband and Cebu Air
Assuming the 90 days trading horizon Transpacific Broadband is expected to generate 1.35 times less return on investment than Cebu Air. In addition to that, Transpacific Broadband is 2.25 times more volatile than Cebu Air Preferred. It trades about 0.02 of its total potential returns per unit of risk. Cebu Air Preferred is currently generating about 0.06 per unit of volatility. If you would invest 3,140 in Cebu Air Preferred on September 3, 2024 and sell it today you would earn a total of 570.00 from holding Cebu Air Preferred or generate 18.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 93.51% |
| Values | Daily Returns |
Transpacific Broadband Group vs. Cebu Air Preferred
Performance |
| Timeline |
| Transpacific Broadband |
| Cebu Air Preferred |
Transpacific Broadband and Cebu Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transpacific Broadband and Cebu Air
The main advantage of trading using opposite Transpacific Broadband and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transpacific Broadband 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.The idea behind Transpacific Broadband Group and Cebu Air Preferred 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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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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