Correlation Between Qantas Airways and Cathay Pacific
Can any of the company-specific risk be diversified away by investing in both Qantas Airways 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 Qantas Airways and Cathay Pacific 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 Cathay Pacific Airways, you can compare the effects of market volatilities on Qantas Airways 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 Qantas Airways with a short position of Cathay Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qantas Airways and Cathay Pacific.
Diversification Opportunities for Qantas Airways and Cathay Pacific
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Qantas and Cathay is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Qantas Airways Limited 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 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 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 Qantas Airways i.e., Qantas Airways and Cathay Pacific go up and down completely randomly.
Pair Corralation between Qantas Airways and Cathay Pacific
Assuming the 90 days horizon Qantas Airways Limited is expected to generate 1.07 times more return on investment than Cathay Pacific. However, Qantas Airways is 1.07 times more volatile than Cathay Pacific Airways. It trades about 0.11 of its potential returns per unit of risk. Cathay Pacific Airways is currently generating about 0.01 per unit of risk. If you would invest 351.00 in Qantas Airways Limited on August 29, 2024 and sell it today you would earn a total of 189.00 from holding Qantas Airways Limited or generate 53.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 64.9% |
| Values | Daily Returns |
Qantas Airways Limited vs. Cathay Pacific Airways
Performance |
| Timeline |
| Qantas Airways |
| Cathay Pacific Airways |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Qantas Airways and Cathay Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Qantas Airways and Cathay Pacific
The main advantage of trading using opposite Qantas Airways and Cathay Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qantas Airways 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.| Qantas Airways vs. Finnair Oyj | Qantas Airways vs. easyJet plc | Qantas Airways vs. Norse Atlantic ASA | Qantas Airways vs. Air New Zealand |
| Cathay Pacific vs. Finnair Oyj | Cathay Pacific vs. easyJet plc | Cathay Pacific vs. Norse Atlantic ASA | Cathay Pacific vs. Air New Zealand |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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