Correlation Between Dow Jones and Cathay Pacific
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Cathay Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Cathay Pacific Airways, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Cathay Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Cathay Pacific.
Diversification Opportunities for Dow Jones and Cathay Pacific
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Dow and Cathay is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial 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 Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Cathay Pacific go up and down completely randomly.
Pair Corralation between Dow Jones and Cathay Pacific
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.35 times more return on investment than Cathay Pacific. However, Dow Jones Industrial is 2.89 times less risky than Cathay Pacific. It trades about 0.14 of its potential returns per unit of risk. Cathay Pacific Airways is currently generating about -0.01 per unit of risk. If you would invest 3,343,335 in Dow Jones Industrial on August 25, 2024 and sell it today you would earn a total of 1,086,316 from holding Dow Jones Industrial or generate 32.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 50.69% |
| Values | Daily Returns |
Dow Jones Industrial vs. Cathay Pacific Airways
Performance |
| Timeline |
Dow Jones and Cathay Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Cathay Pacific Airways
Pair trading matchups for Cathay Pacific
Pair Trading with Dow Jones and Cathay Pacific
The main advantage of trading using opposite Dow Jones and Cathay Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Sphere Entertainment Co | Dow Jones vs. Perseus Mining Limited | Dow Jones vs. Titan Machinery | Dow Jones vs. Simon Property Group |
| 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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