Correlation Between Qantas Airways and ANA Holdings

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

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

Diversification Opportunities for Qantas Airways and ANA Holdings

-0.07

Correlation Coefficient

Qantas Airways  ANA Holdings

Good diversification

The 3 months correlation between Qantas and ANA is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Qantas Airways Ltd and ANA Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANA Holdings ADR and Qantas Airways 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 Qantas Airways Ltd are associated (or correlated) with ANA Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANA Holdings ADR has no effect on the direction of Qantas Airways i.e., Qantas Airways and ANA Holdings go up and down completely randomly.

Pair Corralation between Qantas Airways and ANA Holdings

Assuming the 90 days horizon Qantas Airways Ltd is expected to generate 0.79 times more return on investment than ANA Holdings. However, Qantas Airways Ltd is 1.27 times less risky than ANA Holdings. It trades about 0.06 of its potential returns per unit of risk. ANA Holdings ADR is currently generating about 0.04 per unit of risk. If you would invest  2,814  in Qantas Airways Ltd on December 28, 2024 and sell it today you would earn a total of  181.00  from holding Qantas Airways Ltd or generate 6.43% return on investment over 90 days.

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

Qantas Airways Ltd  vs.  ANA Holdings ADR

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 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Qantas Airways may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ANA Holdings ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ANA Holdings ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, ANA Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Qantas Airways and ANA Holdings

The main advantage of trading using opposite Qantas Airways and ANA Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qantas Airways position performs unexpectedly, ANA Holdings 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 ANA Holdings will offset losses from the drop in ANA Holdings' long position.

The idea behind Qantas Airways Ltd and ANA Holdings ADR 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.