Correlation Between Air China and Qantas Airways
Can any of the company-specific risk be diversified away by investing in both Air China and Qantas Airways 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 Air China and Qantas Airways into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air China Limited and Qantas Airways Ltd, you can compare the effects of market volatilities on Air China and Qantas Airways 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 Air China with a short position of Qantas Airways. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and Qantas Airways.
Diversification Opportunities for Air China and Qantas Airways
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Air and Qantas is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Air China Limited and Qantas Airways Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qantas Airways and Air China 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 Air China Limited are associated (or correlated) with Qantas Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qantas Airways has no effect on the direction of Air China i.e., Air China and Qantas Airways go up and down completely randomly.
Pair Corralation between Air China and Qantas Airways
Assuming the 90 days horizon Air China Limited is expected to under-perform the Qantas Airways. In addition to that, Air China is 1.18 times more volatile than Qantas Airways Ltd. It trades about -0.01 of its total potential returns per unit of risk. Qantas Airways Ltd is currently generating about 0.12 per unit of volatility. If you would invest 1,832 in Qantas Airways Ltd on August 25, 2024 and sell it today you would earn a total of 1,108 from holding Qantas Airways Ltd or generate 60.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 68.12% |
| Values | Daily Returns |
Air China Limited vs. Qantas Airways Ltd
Performance |
| Timeline |
| Air China Limited |
| Qantas Airways |
Air China and Qantas Airways Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and Qantas Airways
The main advantage of trading using opposite Air China and Qantas Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China position performs unexpectedly, Qantas Airways 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 Qantas Airways will offset losses from the drop in Qantas Airways' long position.| Air China vs. Cebu Air | Air China vs. Finnair Oyj | Air China vs. easyJet plc | Air China vs. Norse Atlantic ASA |
| Qantas Airways vs. Air China Limited | Qantas Airways vs. Air France KLM SA | Qantas Airways vs. AirAsia Group Berhad | Qantas Airways vs. China Southern Airlines |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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