Correlation Between Delta Air and Qantas Airways

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

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

Diversification Opportunities for Delta Air and Qantas Airways

0.52

Correlation Coefficient

Delta Air  Qantas Airways

Very weak diversification

The 3 months correlation between Delta and Qantas is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Qantas Airways Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qantas Airways and Delta Air 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 Delta Air Lines 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 Delta Air i.e., Delta Air and Qantas Airways go up and down completely randomly.

Pair Corralation between Delta Air and Qantas Airways

Considering the 90-day investment horizon Delta Air Lines is expected to under-perform the Qantas Airways. In addition to that, Delta Air is 1.36 times more volatile than Qantas Airways Ltd. It trades about -0.21 of its total potential returns per unit of risk. Qantas Airways Ltd is currently generating about 0.05 per unit of volatility. If you would invest  2,920  in Qantas Airways Ltd on December 2, 2024 and sell it today you would earn a total of  44.00  from holding Qantas Airways Ltd or generate 1.51% return on investment over 90 days.

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

Delta Air Lines  vs.  Qantas Airways Ltd

Delta Air Lines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Air Lines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Delta Air is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Qantas Airways

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Qantas Airways Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Qantas Airways is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Delta Air and Qantas Airways

The main advantage of trading using opposite Delta Air and Qantas Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air 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 Delta Air Lines and Qantas Airways Ltd 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 CEOs Directory module to screen CEOs from public companies around the world.