Correlation Between Qantas Airways and CHINA SOUTHN
Can any of the company-specific risk be diversified away by investing in both Qantas Airways and CHINA SOUTHN 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 Qantas Airways and CHINA SOUTHN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Qantas Airways Limited and CHINA SOUTHN AIR H , you can compare the effects of market volatilities on Qantas Airways and CHINA SOUTHN 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 Qantas Airways with a short position of CHINA SOUTHN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qantas Airways and CHINA SOUTHN.
Diversification Opportunities for Qantas Airways and CHINA SOUTHN
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Qantas and CHINA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Qantas Airways Limited and CHINA SOUTHN AIR H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA SOUTHN AIR and Qantas Airways 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 Qantas Airways Limited are associated (or correlated) with CHINA SOUTHN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA SOUTHN AIR has no effect on the direction of Qantas Airways i.e., Qantas Airways and CHINA SOUTHN go up and down completely randomly.
Pair Corralation between Qantas Airways and CHINA SOUTHN
Assuming the 90 days horizon Qantas Airways is expected to generate 1.94 times less return on investment than CHINA SOUTHN. But when comparing it to its historical volatility, Qantas Airways Limited is 1.4 times less risky than CHINA SOUTHN. It trades about 0.01 of its potential returns per unit of risk. CHINA SOUTHN AIR H is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 49.00 in CHINA SOUTHN AIR H on October 17, 2024 and sell it today you would earn a total of 0.00 from holding CHINA SOUTHN AIR H or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.44% |
| Values | Daily Returns |
Qantas Airways Limited vs. CHINA SOUTHN AIR H
Performance |
| Timeline |
| Qantas Airways |
| CHINA SOUTHN AIR |
Qantas Airways and CHINA SOUTHN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Qantas Airways and CHINA SOUTHN
The main advantage of trading using opposite Qantas Airways and CHINA SOUTHN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qantas Airways position performs unexpectedly, CHINA SOUTHN 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 CHINA SOUTHN will offset losses from the drop in CHINA SOUTHN's long position.| Qantas Airways vs. CONTAGIOUS GAMING INC | Qantas Airways vs. SIERRA METALS | Qantas Airways vs. HOCHSCHILD MINING | Qantas Airways vs. FIREWEED METALS P |
| CHINA SOUTHN vs. Vulcan Materials | CHINA SOUTHN vs. Summit Materials | CHINA SOUTHN vs. ARROW ELECTRONICS | CHINA SOUTHN vs. Arrow Electronics |
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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