Correlation Between EasyJet Plc and Qantas Airways

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

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

Diversification Opportunities for EasyJet Plc and Qantas Airways

0.54

Correlation Coefficient

EasyJet Plc  Qantas Airways

Very weak diversification

The 3 months correlation between EasyJet and Qantas is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding easyJet plc and Qantas Airways Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qantas Airways and EasyJet Plc 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 easyJet plc 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 EasyJet Plc i.e., EasyJet Plc and Qantas Airways go up and down completely randomly.

Pair Corralation between EasyJet Plc and Qantas Airways

Assuming the 90 days horizon EasyJet Plc is expected to generate 3.8 times less return on investment than Qantas Airways. In addition to that, EasyJet Plc is 1.54 times more volatile than Qantas Airways Ltd. It trades about 0.03 of its total potential returns per unit of risk. Qantas Airways Ltd is currently generating about 0.15 per unit of volatility. If you would invest  2,059  in Qantas Airways Ltd on September 3, 2024 and sell it today you would earn a total of  815.00  from holding Qantas Airways Ltd or generate 39.58% return on investment over 90 days.

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

easyJet plc  vs.  Qantas Airways Ltd

easyJet plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in easyJet plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EasyJet Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Qantas Airways

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qantas Airways Ltd are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Qantas Airways showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EasyJet Plc and Qantas Airways

The main advantage of trading using opposite EasyJet Plc and Qantas Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EasyJet Plc 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 easyJet plc 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.