Correlation Between Air China and Cathay Pacific
Can any of the company-specific risk be diversified away by investing in both Air China 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 China 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 China Ltd and Cathay Pacific Airways, you can compare the effects of market volatilities on Air China 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 China with a short position of Cathay Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and Cathay Pacific.
Diversification Opportunities for Air China and Cathay Pacific
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Air and Cathay is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Air China Ltd 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 China 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 China Ltd 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 China i.e., Air China and Cathay Pacific go up and down completely randomly.
Pair Corralation between Air China and Cathay Pacific
If you would invest 981.00 in Air China Ltd on August 25, 2024 and sell it today you would earn a total of 269.00 from holding Air China Ltd or generate 27.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
Air China Ltd vs. Cathay Pacific Airways
Performance |
| Timeline |
| Air China |
| Cathay Pacific Airways |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Air China and Cathay Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and Cathay Pacific
The main advantage of trading using opposite Air China and Cathay Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China 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.| Air China vs. easyJet plc | Air China vs. Norse Atlantic ASA | Air China vs. Air China Limited | Air China vs. Cebu Air |
| Cathay Pacific vs. Finnair Oyj | Cathay Pacific vs. easyJet plc | Cathay Pacific vs. Norse Atlantic ASA | Cathay Pacific vs. Air New Zealand |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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