Correlation Between Cebu Air and GT Capital

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

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

Diversification Opportunities for Cebu Air and GT Capital

0.36

Correlation Coefficient

Cebu Air  GT Capital

Weak diversification

The 3 months correlation between Cebu and GTCAP is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air and GT Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GT Capital Holdings and Cebu Air 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 Cebu Air are associated (or correlated) with GT Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GT Capital Holdings has no effect on the direction of Cebu Air i.e., Cebu Air and GT Capital go up and down completely randomly.

Pair Corralation between Cebu Air and GT Capital

Assuming the 90 days trading horizon Cebu Air is expected to generate 4.15 times less return on investment than GT Capital. But when comparing it to its historical volatility, Cebu Air is 2.89 times less risky than GT Capital. It trades about 0.16 of its potential returns per unit of risk. GT Capital Holdings is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  47,000  in GT Capital Holdings on April 21, 2025 and sell it today you would earn a total of  18,300  from holding GT Capital Holdings or generate 38.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cebu Air  vs.  GT Capital Holdings

Cebu Air

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cebu Air are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Cebu Air may actually be approaching a critical reversion point that can send shares even higher in August 2025.

GT Capital Holdings

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GT Capital Holdings are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental indicators, GT Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cebu Air and GT Capital

The main advantage of trading using opposite Cebu Air and GT Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cebu Air position performs unexpectedly, GT Capital 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 GT Capital will offset losses from the drop in GT Capital's long position.

The idea behind Cebu Air and GT Capital Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..