Correlation Between RETAIL FOOD and Qantas Airways

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

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

Diversification Opportunities for RETAIL FOOD and Qantas Airways

0.54

Correlation Coefficient

RETAIL FOOD  Qantas Airways

Very weak diversification

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

Pair Corralation between RETAIL FOOD and Qantas Airways

Assuming the 90 days trading horizon RETAIL FOOD GROUP is expected to under-perform the Qantas Airways. In addition to that, RETAIL FOOD is 1.75 times more volatile than Qantas Airways Limited. It trades about -0.01 of its total potential returns per unit of risk. Qantas Airways Limited is currently generating about 0.04 per unit of volatility. If you would invest  416.00  in Qantas Airways Limited on October 4, 2024 and sell it today you would earn a total of  116.00  from holding Qantas Airways Limited or generate 27.88% return on investment over 90 days.

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

RETAIL FOOD GROUP  vs.  Qantas Airways Limited

RETAIL FOOD GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RETAIL FOOD GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, RETAIL FOOD 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

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 RETAIL FOOD and Qantas Airways

The main advantage of trading using opposite RETAIL FOOD and Qantas Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RETAIL FOOD 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 RETAIL FOOD GROUP 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.