Correlation Between China Eastern and Cathay Pacific
Can any of the company-specific risk be diversified away by investing in both China Eastern 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 China Eastern and Cathay Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Eastern Airlines and Cathay Pacific Airways, you can compare the effects of market volatilities on China Eastern 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 China Eastern with a short position of Cathay Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Eastern and Cathay Pacific.
Diversification Opportunities for China Eastern and Cathay Pacific
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between China and Cathay is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding China Eastern Airlines 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 China Eastern 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 China Eastern Airlines 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 China Eastern i.e., China Eastern and Cathay Pacific go up and down completely randomly.
Pair Corralation between China Eastern and Cathay Pacific
If you would invest 526.00 in Cathay Pacific Airways on September 1, 2024 and sell it today you would earn a total of 93.00 from holding Cathay Pacific Airways or generate 17.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
China Eastern Airlines vs. Cathay Pacific Airways
Performance |
| Timeline |
| China Eastern Airlines |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Cathay Pacific Airways |
China Eastern and Cathay Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Eastern and Cathay Pacific
The main advantage of trading using opposite China Eastern and Cathay Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Eastern 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.| China Eastern vs. Franklin Credit Management | China Eastern vs. Sabra Healthcare REIT | China Eastern vs. PennantPark Floating Rate | China Eastern vs. Fidus Investment Corp |
| Cathay Pacific vs. Singapore Airlines | Cathay Pacific vs. International Consolidated Airlines | Cathay Pacific vs. Air France KLM | Cathay Pacific vs. Qantas Airways Ltd |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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