Correlation Between BRIT AMER and Qantas Airways

Can any of the company-specific risk be diversified away by investing in both BRIT AMER 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 BRIT AMER and Qantas Airways into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BRIT AMER TOBACCO and Qantas Airways Limited, you can compare the effects of market volatilities on BRIT AMER 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 BRIT AMER with a short position of Qantas Airways. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRIT AMER and Qantas Airways.

Diversification Opportunities for BRIT AMER and Qantas Airways

0.82

Correlation Coefficient

BRIT AMER  Qantas Airways

Very poor diversification

The 3 months correlation between BRIT and Qantas is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO and Qantas Airways Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qantas Airways and BRIT AMER 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 BRIT AMER TOBACCO 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 BRIT AMER i.e., BRIT AMER and Qantas Airways go up and down completely randomly.

Pair Corralation between BRIT AMER and Qantas Airways

Assuming the 90 days trading horizon BRIT AMER TOBACCO is expected to generate 0.41 times more return on investment than Qantas Airways. However, BRIT AMER TOBACCO is 2.42 times less risky than Qantas Airways. It trades about 0.01 of its potential returns per unit of risk. Qantas Airways Limited is currently generating about -0.14 per unit of risk. If you would invest  3,482  in BRIT AMER TOBACCO on October 4, 2024 and sell it today you would earn a total of  1.00  from holding BRIT AMER TOBACCO or generate 0.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

BRIT AMER TOBACCO  vs.  Qantas Airways Limited

BRIT AMER TOBACCO

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BRIT AMER TOBACCO are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BRIT AMER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Qantas Airways

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qantas Airways Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Qantas Airways reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BRIT AMER and Qantas Airways

The main advantage of trading using opposite BRIT AMER and Qantas Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRIT AMER 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.

The idea behind BRIT AMER TOBACCO and Qantas Airways Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.