Correlation Between Bank of the and Cebu Air

Can any of the company-specific risk be diversified away by investing in both Bank of the 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 Bank of the and Cebu Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of the and Cebu Air Preferred, you can compare the effects of market volatilities on Bank of the 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 Bank of the with a short position of Cebu Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of the and Cebu Air.

Diversification Opportunities for Bank of the and Cebu Air

-0.48

Correlation Coefficient

Bank of the  Cebu Air

Very good diversification

The 3 months correlation between Bank and Cebu is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bank of the 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 Bank of the 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 Bank of the 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 Bank of the i.e., Bank of the and Cebu Air go up and down completely randomly.

Pair Corralation between Bank of the and Cebu Air

Assuming the 90 days trading horizon Bank of the is expected to under-perform the Cebu Air. But the stock apears to be less risky and, when comparing its historical volatility, Bank of the is 1.05 times less risky than Cebu Air. The stock trades about -0.07 of its potential returns per unit of risk. The Cebu Air Preferred is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,660  in Cebu Air Preferred on April 21, 2025 and sell it today you would earn a total of  350.00  from holding Cebu Air Preferred or generate 9.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.32%
Values	Daily Returns

Bank of the  vs.  Cebu Air Preferred

Bank of the

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of the has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Cebu Air Preferred

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cebu Air Preferred are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Cebu Air may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Bank of the and Cebu Air

The main advantage of trading using opposite Bank of the and Cebu Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of the 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 Bank of the 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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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.