Correlation Between Hawaiian Holdings and Cathay Pacific

Can any of the company-specific risk be diversified away by investing in both Hawaiian Holdings 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 Hawaiian Holdings and Cathay Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hawaiian Holdings and Cathay Pacific Airways, you can compare the effects of market volatilities on Hawaiian Holdings 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 Hawaiian Holdings with a short position of Cathay Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hawaiian Holdings and Cathay Pacific.

Diversification Opportunities for Hawaiian Holdings and Cathay Pacific

-0.93

Correlation Coefficient

Hawaiian Holdings  Cathay Pacific

Pay attention - limited upside

The 3 months correlation between Hawaiian and Cathay is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Holdings 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 Hawaiian Holdings 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 Hawaiian Holdings 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 Hawaiian Holdings i.e., Hawaiian Holdings and Cathay Pacific go up and down completely randomly.

Pair Corralation between Hawaiian Holdings and Cathay Pacific

If you would invest  1,739  in Hawaiian Holdings on September 4, 2024 and sell it today you would earn a total of  61.00  from holding Hawaiian Holdings or generate 3.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	68.75%
Values	Daily Returns

Hawaiian Holdings  vs.  Cathay Pacific Airways

Hawaiian Holdings

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Hawaiian Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat abnormal basic indicators, Hawaiian Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Cathay Pacific Airways

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cathay Pacific Airways has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cathay Pacific is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hawaiian Holdings and Cathay Pacific

The main advantage of trading using opposite Hawaiian Holdings and Cathay Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawaiian Holdings 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.

The idea behind Hawaiian Holdings and Cathay Pacific Airways pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.