Correlation Between Air New and Cathay Pacific

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Air New and Cathay Pacific 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 Air New and Cathay Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air New Zealand and Cathay Pacific Airways, you can compare the effects of market volatilities on Air New and Cathay Pacific 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 Air New with a short position of Cathay Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Cathay Pacific.

Diversification Opportunities for Air New and Cathay Pacific

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Air and Cathay is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Cathay Pacific Airways in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cathay Pacific Airways and Air New 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 Air New Zealand are associated (or correlated) with Cathay Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cathay Pacific Airways has no effect on the direction of Air New i.e., Air New and Cathay Pacific go up and down completely randomly.

Pair Corralation between Air New and Cathay Pacific

Assuming the 90 days horizon Air New is expected to generate 4.65 times less return on investment than Cathay Pacific. In addition to that, Air New is 1.21 times more volatile than Cathay Pacific Airways. It trades about 0.01 of its total potential returns per unit of risk. Cathay Pacific Airways is currently generating about 0.08 per unit of volatility. If you would invest  615.00  in Cathay Pacific Airways on December 28, 2024 and sell it today you would earn a total of  57.00  from holding Cathay Pacific Airways or generate 9.27% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy96.67%
ValuesDaily Returns

Air New Zealand  vs.  Cathay Pacific Airways

 Performance 
       Timeline  
Air New Zealand 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Air New Zealand are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Air New is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Cathay Pacific Airways 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Pacific Airways are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Cathay Pacific may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Air New and Cathay Pacific Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Air New and Cathay Pacific

The main advantage of trading using opposite Air New and Cathay Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New position performs unexpectedly, Cathay Pacific 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 Cathay Pacific will offset losses from the drop in Cathay Pacific's long position.
The idea behind Air New Zealand and Cathay Pacific Airways 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.
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

Other Complementary Tools

Money Managers
Screen money managers from public funds and ETFs managed around the world
My Watchlist Analysis
Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Latest Portfolios
Quick portfolio dashboard that showcases your latest portfolios
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk