Correlation Between China Eastern and Qantas Airways
Can any of the company-specific risk be diversified away by investing in both China Eastern 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 China Eastern and Qantas Airways into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Eastern Airlines and Qantas Airways Limited, you can compare the effects of market volatilities on China Eastern 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 China Eastern with a short position of Qantas Airways. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Eastern and Qantas Airways.
Diversification Opportunities for China Eastern and Qantas Airways
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between China and Qantas is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding China Eastern Airlines and Qantas Airways Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qantas Airways and China Eastern 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 China Eastern Airlines 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 China Eastern i.e., China Eastern and Qantas Airways go up and down completely randomly.
Pair Corralation between China Eastern and Qantas Airways
If you would invest 525.00 in Qantas Airways Limited on August 29, 2024 and sell it today you would earn a total of 15.00 from holding Qantas Airways Limited or generate 2.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 4.55% |
| Values | Daily Returns |
China Eastern Airlines vs. Qantas Airways Limited
Performance |
| Timeline |
| China Eastern Airlines |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Qantas Airways |
China Eastern and Qantas Airways Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Eastern and Qantas Airways
The main advantage of trading using opposite China Eastern and Qantas Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Eastern 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.| China Eastern vs. Fast Retailing Co | China Eastern vs. SL Green Realty | China Eastern vs. Grocery Outlet Holding | China Eastern vs. Franklin Street Properties |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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