Correlation Between Steel Dynamics and Cathay Pacific
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics 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 Steel Dynamics and Cathay Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Cathay Pacific Airways, you can compare the effects of market volatilities on Steel Dynamics 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 Steel Dynamics with a short position of Cathay Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Cathay Pacific.
Diversification Opportunities for Steel Dynamics and Cathay Pacific
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Steel and Cathay is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics 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 Steel Dynamics 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 Steel Dynamics 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 Steel Dynamics i.e., Steel Dynamics and Cathay Pacific go up and down completely randomly.
Pair Corralation between Steel Dynamics and Cathay Pacific
Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.84 times more return on investment than Cathay Pacific. However, Steel Dynamics is 1.19 times less risky than Cathay Pacific. It trades about 0.06 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 9,706 in Steel Dynamics on September 1, 2024 and sell it today you would earn a total of 4,821 from holding Steel Dynamics or generate 49.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 49.73% |
| Values | Daily Returns |
Steel Dynamics vs. Cathay Pacific Airways
Performance |
| Timeline |
| Steel Dynamics |
| Cathay Pacific Airways |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
Steel Dynamics and Cathay Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Cathay Pacific
The main advantage of trading using opposite Steel Dynamics and Cathay Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics 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.| Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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