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
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steel and Cathay is 0.65. 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 1.34 times less return on investment than Cathay Pacific. In addition to that, Steel Dynamics is 2.1 times more volatile than Cathay Pacific Airways. It trades about 0.16 of its total potential returns per unit of risk. Cathay Pacific Airways is currently generating about 0.46 per unit of volatility. If you would invest 526.00 in Cathay Pacific Airways on September 1, 2024 and sell it today you would earn a total of 93.00 from holding Cathay Pacific Airways or generate 17.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Steel Dynamics vs. Cathay Pacific Airways
Performance |
| Timeline |
| Steel Dynamics |
| Cathay Pacific Airways |
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. Singapore Airlines | Cathay Pacific vs. International Consolidated Airlines | Cathay Pacific vs. Air France KLM | Cathay Pacific 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |