Correlation Between Cathay Pacific and ANA Holdings
Can any of the company-specific risk be diversified away by investing in both Cathay Pacific and ANA Holdings 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 ANA Holdings 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 ANA Holdings ADR, you can compare the effects of market volatilities on Cathay Pacific and ANA Holdings 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 ANA Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cathay Pacific and ANA Holdings.
Diversification Opportunities for Cathay Pacific and ANA Holdings
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cathay and ANA is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Cathay Pacific Airways and ANA Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANA Holdings ADR 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 ANA Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANA Holdings ADR has no effect on the direction of Cathay Pacific i.e., Cathay Pacific and ANA Holdings go up and down completely randomly.
Pair Corralation between Cathay Pacific and ANA Holdings
Assuming the 90 days horizon Cathay Pacific Airways is expected to generate 1.57 times more return on investment than ANA Holdings. However, Cathay Pacific is 1.57 times more volatile than ANA Holdings ADR. It trades about 0.32 of its potential returns per unit of risk. ANA Holdings ADR is currently generating about 0.16 per unit of risk. If you would invest 593.00 in Cathay Pacific Airways on November 2, 2024 and sell it today you would earn a total of 80.00 from holding Cathay Pacific Airways or generate 13.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cathay Pacific Airways vs. ANA Holdings ADR
Performance |
| Timeline |
| Cathay Pacific Airways |
| ANA Holdings ADR |
Cathay Pacific and ANA Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cathay Pacific and ANA Holdings
The main advantage of trading using opposite Cathay Pacific and ANA Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cathay Pacific position performs unexpectedly, ANA Holdings 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 ANA Holdings will offset losses from the drop in ANA Holdings' long position.| Cathay Pacific vs. Singapore Airlines | Cathay Pacific vs. International Consolidated Airlines | Cathay Pacific vs. Air France KLM | Cathay Pacific vs. Qantas Airways Ltd |
| ANA Holdings vs. Cathay Pacific Airways | ANA Holdings vs. Air China Ltd | ANA Holdings vs. Ajinomoto Co ADR | ANA Holdings 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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