Correlation Between Qantas Airways and Whitehaven Coal

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

By analyzing existing cross correlation between Qantas Airways and Whitehaven Coal, you can compare the effects of market volatilities on Qantas Airways and Whitehaven Coal 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 Whitehaven Coal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qantas Airways and Whitehaven Coal.

Diversification Opportunities for Qantas Airways and Whitehaven Coal

-0.13

Correlation Coefficient

Qantas Airways  Whitehaven Coal

Good diversification

The 3 months correlation between Qantas and Whitehaven is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Qantas Airways and Whitehaven Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal 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 are associated (or correlated) with Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of Qantas Airways i.e., Qantas Airways and Whitehaven Coal go up and down completely randomly.

Pair Corralation between Qantas Airways and Whitehaven Coal

Assuming the 90 days trading horizon Qantas Airways is expected to generate 0.84 times more return on investment than Whitehaven Coal. However, Qantas Airways is 1.18 times less risky than Whitehaven Coal. It trades about 0.02 of its potential returns per unit of risk. Whitehaven Coal is currently generating about -0.02 per unit of risk. If you would invest  891.00  in Qantas Airways on December 23, 2024 and sell it today you would earn a total of  11.00  from holding Qantas Airways or generate 1.23% return on investment over 90 days.

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

Qantas Airways  vs.  Whitehaven Coal

Qantas Airways

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Qantas Airways are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Qantas Airways is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Whitehaven Coal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Whitehaven Coal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Whitehaven Coal is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Qantas Airways and Whitehaven Coal

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

The idea behind Qantas Airways and Whitehaven Coal 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.