Correlation Between EasyJet Plc and Qantas Airways
Can any of the company-specific risk be diversified away by investing in both EasyJet Plc 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 EasyJet Plc and Qantas Airways into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between easyJet plc and Qantas Airways Limited, you can compare the effects of market volatilities on EasyJet Plc 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 EasyJet Plc with a short position of Qantas Airways. Check out your portfolio center. Please also check ongoing floating volatility patterns of EasyJet Plc and Qantas Airways.
Diversification Opportunities for EasyJet Plc and Qantas Airways
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between EasyJet and Qantas is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding easyJet plc and Qantas Airways Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qantas Airways and EasyJet Plc 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 easyJet plc 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 EasyJet Plc i.e., EasyJet Plc and Qantas Airways go up and down completely randomly.
Pair Corralation between EasyJet Plc and Qantas Airways
Assuming the 90 days horizon EasyJet Plc is expected to generate 15.81 times less return on investment than Qantas Airways. In addition to that, EasyJet Plc is 1.42 times more volatile than Qantas Airways Limited. It trades about 0.0 of its total potential returns per unit of risk. Qantas Airways Limited is currently generating about 0.1 per unit of volatility. If you would invest 354.00 in Qantas Airways Limited on August 25, 2024 and sell it today you would earn a total of 186.00 from holding Qantas Airways Limited or generate 52.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 87.77% |
| Values | Daily Returns |
easyJet plc vs. Qantas Airways Limited
Performance |
| Timeline |
| easyJet plc |
| Qantas Airways |
EasyJet Plc and Qantas Airways Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EasyJet Plc and Qantas Airways
The main advantage of trading using opposite EasyJet Plc and Qantas Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EasyJet Plc 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.| EasyJet Plc vs. Air China Limited | EasyJet Plc vs. Air France KLM SA | EasyJet Plc vs. AirAsia Group Berhad | EasyJet Plc vs. China Southern Airlines |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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