Correlation Between Cebu Air and Air France-KLM

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

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

Diversification Opportunities for Cebu Air and Air France-KLM

0.0

Correlation Coefficient

Cebu Air  Air France-KLM

Pay attention - limited upside

The 3 months correlation between Cebu and Air is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cebu Air and Air France KLM SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM 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 Air France-KLM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Cebu Air i.e., Cebu Air and Air France-KLM go up and down completely randomly.

Pair Corralation between Cebu Air and Air France-KLM

If you would invest  855.00  in Air France KLM SA on July 22, 2024 and sell it today you would earn a total of  98.00  from holding Air France KLM SA or generate 11.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Cebu Air  vs.  Air France KLM SA

Cebu Air

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cebu Air has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cebu Air is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Air France KLM

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Air France KLM SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air France-KLM may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Cebu Air and Air France-KLM

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

The idea behind Cebu Air and Air France KLM SA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.