Correlation Between Sky Metals and Qantas Airways
Can any of the company-specific risk be diversified away by investing in both Sky Metals 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 Sky Metals and Qantas Airways into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sky Metals and Qantas Airways, you can compare the effects of market volatilities on Sky Metals 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 Sky Metals with a short position of Qantas Airways. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sky Metals and Qantas Airways.
Diversification Opportunities for Sky Metals and Qantas Airways
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sky and Qantas is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Sky Metals and Qantas Airways in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qantas Airways and Sky Metals 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 Sky Metals 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 Sky Metals i.e., Sky Metals and Qantas Airways go up and down completely randomly.
Pair Corralation between Sky Metals and Qantas Airways
Assuming the 90 days trading horizon Sky Metals is expected to generate 2.91 times more return on investment than Qantas Airways. However, Sky Metals is 2.91 times more volatile than Qantas Airways. It trades about 0.07 of its potential returns per unit of risk. Qantas Airways is currently generating about 0.13 per unit of risk. If you would invest 3.20 in Sky Metals on November 5, 2024 and sell it today you would earn a total of 2.30 from holding Sky Metals or generate 71.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sky Metals vs. Qantas Airways
Performance |
| Timeline |
| Sky Metals |
| Qantas Airways |
Sky Metals and Qantas Airways Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sky Metals and Qantas Airways
The main advantage of trading using opposite Sky Metals and Qantas Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sky Metals 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.| Sky Metals vs. Navigator Global Investments | Sky Metals vs. Djerriwarrh Investments | Sky Metals vs. Event Hospitality and | Sky Metals vs. Global Health |
| Qantas Airways vs. Truscott Mining Corp | Qantas Airways vs. Australian Agricultural | Qantas Airways vs. IDP Education | Qantas Airways vs. Collins Foods |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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