Correlation Between Cebu Air and Metropolitan Bank

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

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

Diversification Opportunities for Cebu Air and Metropolitan Bank

-0.03

Correlation Coefficient

Cebu Air  Metropolitan Bank

Good diversification

The 3 months correlation between Cebu and Metropolitan is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air Preferred and Metropolitan Bank Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Bank Trust 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 Preferred are associated (or correlated) with Metropolitan Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan Bank Trust has no effect on the direction of Cebu Air i.e., Cebu Air and Metropolitan Bank go up and down completely randomly.

Pair Corralation between Cebu Air and Metropolitan Bank

Assuming the 90 days trading horizon Cebu Air Preferred is expected to generate 1.12 times more return on investment than Metropolitan Bank. However, Cebu Air is 1.12 times more volatile than Metropolitan Bank Trust. It trades about 0.11 of its potential returns per unit of risk. Metropolitan Bank Trust is currently generating about 0.01 per unit of risk. If you would invest  3,600  in Cebu Air Preferred on April 22, 2025 and sell it today you would earn a total of  410.00  from holding Cebu Air Preferred or generate 11.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.16%
Values	Daily Returns

Cebu Air Preferred  vs.  Metropolitan Bank Trust

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 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Cebu Air reported solid returns over the last few months and may actually be approaching a breakup point.

Metropolitan Bank Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Metropolitan Bank Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Metropolitan Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cebu Air and Metropolitan Bank

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

The idea behind Cebu Air Preferred and Metropolitan Bank Trust 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.