Correlation Between Cathay Pacific and Singapore Airlines
Can any of the company-specific risk be diversified away by investing in both Cathay Pacific and Singapore Airlines 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 Singapore Airlines 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 Singapore Airlines, you can compare the effects of market volatilities on Cathay Pacific and Singapore Airlines 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 Singapore Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Pacific and Singapore Airlines.
Diversification Opportunities for Cathay Pacific and Singapore Airlines
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cathay and Singapore is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Pacific Airways and Singapore Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Airlines 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 Singapore Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Airlines has no effect on the direction of Cathay Pacific i.e., Cathay Pacific and Singapore Airlines go up and down completely randomly.
Pair Corralation between Cathay Pacific and Singapore Airlines
Assuming the 90 days horizon Cathay Pacific is expected to generate 2.65 times less return on investment than Singapore Airlines. But when comparing it to its historical volatility, Cathay Pacific Airways is 1.7 times less risky than Singapore Airlines. It trades about 0.01 of its potential returns per unit of risk. Singapore Airlines is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 443.00 in Singapore Airlines on August 29, 2024 and sell it today you would lose (4.00) from holding Singapore Airlines or give up 0.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 71.86% |
| Values | Daily Returns |
Cathay Pacific Airways vs. Singapore Airlines
Performance |
| Timeline |
| Cathay Pacific Airways |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Singapore Airlines |
Cathay Pacific and Singapore Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Pacific and Singapore Airlines
The main advantage of trading using opposite Cathay Pacific and Singapore Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Pacific position performs unexpectedly, Singapore Airlines 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 Singapore Airlines will offset losses from the drop in Singapore Airlines' long position.| Cathay Pacific vs. Finnair Oyj | Cathay Pacific vs. easyJet plc | Cathay Pacific vs. Norse Atlantic ASA | Cathay Pacific vs. Air New Zealand |
| Singapore Airlines vs. Finnair Oyj | Singapore Airlines vs. easyJet plc | Singapore Airlines vs. Norse Atlantic ASA | Singapore Airlines 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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