Correlation Between Cathay Pacific and Finnair Oyj
Can any of the company-specific risk be diversified away by investing in both Cathay Pacific and Finnair Oyj 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 Finnair Oyj 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 Finnair Oyj, you can compare the effects of market volatilities on Cathay Pacific and Finnair Oyj 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 Finnair Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Pacific and Finnair Oyj.
Diversification Opportunities for Cathay Pacific and Finnair Oyj
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cathay and Finnair is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Pacific Airways and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj 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 Finnair Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finnair Oyj has no effect on the direction of Cathay Pacific i.e., Cathay Pacific and Finnair Oyj go up and down completely randomly.
Pair Corralation between Cathay Pacific and Finnair Oyj
Assuming the 90 days horizon Cathay Pacific Airways is expected to generate 0.5 times more return on investment than Finnair Oyj. However, Cathay Pacific Airways is 2.01 times less risky than Finnair Oyj. It trades about -0.14 of its potential returns per unit of risk. Finnair Oyj is currently generating about -0.11 per unit of risk. If you would invest 101.00 in Cathay Pacific Airways on August 28, 2024 and sell it today you would lose (10.00) from holding Cathay Pacific Airways or give up 9.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 65.08% |
| Values | Daily Returns |
Cathay Pacific Airways vs. Finnair Oyj
Performance |
| Timeline |
| Cathay Pacific Airways |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Finnair Oyj |
Cathay Pacific and Finnair Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Pacific and Finnair Oyj
The main advantage of trading using opposite Cathay Pacific and Finnair Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Pacific position performs unexpectedly, Finnair Oyj 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 Finnair Oyj will offset losses from the drop in Finnair Oyj's long position.| Cathay Pacific vs. Finnair Oyj | Cathay Pacific vs. easyJet plc | Cathay Pacific vs. Norse Atlantic ASA | Cathay Pacific vs. Air New Zealand |
| Finnair Oyj vs. easyJet plc | Finnair Oyj vs. Norse Atlantic ASA | Finnair Oyj vs. Air New Zealand | Finnair Oyj vs. Air China Limited |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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