Correlation Between United Utilities and Cebu Air
Can any of the company-specific risk be diversified away by investing in both United Utilities 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 United Utilities and Cebu Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Utilities Group and Cebu Air ADR, you can compare the effects of market volatilities on United Utilities 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 United Utilities with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Cebu Air.
Diversification Opportunities for United Utilities and Cebu Air
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Cebu is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group 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 United Utilities 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 United Utilities 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 ADR has no effect on the direction of United Utilities i.e., United Utilities and Cebu Air go up and down completely randomly.
Pair Corralation between United Utilities and Cebu Air
Assuming the 90 days horizon United Utilities is expected to generate 6.15 times less return on investment than Cebu Air. But when comparing it to its historical volatility, United Utilities Group is 3.27 times less risky than Cebu Air. It trades about 0.03 of its potential returns per unit of risk. Cebu Air ADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 150.00 in Cebu Air ADR on September 5, 2024 and sell it today you would earn a total of 35.00 from holding Cebu Air ADR or generate 23.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
United Utilities Group vs. Cebu Air ADR
Performance |
| Timeline |
| United Utilities |
| Cebu Air ADR |
United Utilities and Cebu Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Cebu Air
The main advantage of trading using opposite United Utilities and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities 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.| United Utilities vs. Artesian Resources | United Utilities vs. Global Water Resources | United Utilities vs. Essential Utilities | United Utilities vs. American Water Works |
| Cebu Air vs. The Mosaic | Cebu Air vs. Siriuspoint | Cebu Air vs. Commonwealth Bank of | Cebu Air vs. LithiumBank Resources Corp |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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