Correlation Between JAPAN AIRLINES and Qantas Airways

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

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

Diversification Opportunities for JAPAN AIRLINES and Qantas Airways

0.45

Correlation Coefficient

JAPAN AIRLINES  Qantas Airways

Very weak diversification

The 3 months correlation between JAPAN and Qantas is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and Qantas Airways Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qantas Airways and JAPAN AIRLINES 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 JAPAN AIRLINES 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 JAPAN AIRLINES i.e., JAPAN AIRLINES and Qantas Airways go up and down completely randomly.

Pair Corralation between JAPAN AIRLINES and Qantas Airways

Assuming the 90 days trading horizon JAPAN AIRLINES is expected to under-perform the Qantas Airways. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN AIRLINES is 2.09 times less risky than Qantas Airways. The stock trades about -0.16 of its potential returns per unit of risk. The Qantas Airways Limited is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  544.00  in Qantas Airways Limited on October 23, 2024 and sell it today you would lose (2.00) from holding Qantas Airways Limited or give up 0.37% of portfolio value over 90 days.

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

JAPAN AIRLINES  vs.  Qantas Airways Limited

JAPAN AIRLINES

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in JAPAN AIRLINES are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, JAPAN AIRLINES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Qantas Airways

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Qantas Airways Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Qantas Airways reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JAPAN AIRLINES and Qantas Airways

The main advantage of trading using opposite JAPAN AIRLINES and Qantas Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES 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 JAPAN AIRLINES 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.