Correlation Between Cathay Pacific and Cathay Pacific

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

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

Diversification Opportunities for Cathay Pacific and Cathay Pacific

-0.56

Correlation Coefficient

Cathay Pacific  Cathay Pacific

Excellent diversification

The 3 months correlation between Cathay and Cathay is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Pacific Airways 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 Cathay Pacific 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 Cathay Pacific Airways 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 Cathay Pacific i.e., Cathay Pacific and Cathay Pacific go up and down completely randomly.

Pair Corralation between Cathay Pacific and Cathay Pacific

Assuming the 90 days horizon Cathay Pacific Airways is expected to generate 2.15 times more return on investment than Cathay Pacific. However, Cathay Pacific is 2.15 times more volatile than Cathay Pacific Airways. It trades about 0.21 of its potential returns per unit of risk. Cathay Pacific Airways is currently generating about 0.24 per unit of risk. If you would invest  491.00  in Cathay Pacific Airways on September 3, 2024 and sell it today you would earn a total of  125.00  from holding Cathay Pacific Airways or generate 25.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	26.56%
Values	Daily Returns

Cathay Pacific Airways  vs.  Cathay Pacific Airways

Cathay Pacific Airways

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cathay Pacific Airways are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Cathay Pacific showed solid returns over the last few months and may actually be approaching a breakup point.

Cathay Pacific Airways

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Cathay Pacific Airways has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Cathay Pacific reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cathay Pacific and Cathay Pacific

The main advantage of trading using opposite Cathay Pacific and Cathay Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Pacific 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 Cathay Pacific Airways 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.