Correlation Between QinetiQ Group and Thales SA

Can any of the company-specific risk be diversified away by investing in both QinetiQ Group and Thales SA 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 QinetiQ Group and Thales SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between QinetiQ Group plc and Thales SA, you can compare the effects of market volatilities on QinetiQ Group and Thales SA 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 QinetiQ Group with a short position of Thales SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of QinetiQ Group and Thales SA.

Diversification Opportunities for QinetiQ Group and Thales SA

0.7

Correlation Coefficient

QinetiQ Group  Thales SA

Poor diversification

The 3 months correlation between QinetiQ and Thales is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding QinetiQ Group plc and Thales SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thales SA and QinetiQ Group 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 QinetiQ Group plc are associated (or correlated) with Thales SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thales SA has no effect on the direction of QinetiQ Group i.e., QinetiQ Group and Thales SA go up and down completely randomly.

Pair Corralation between QinetiQ Group and Thales SA

Assuming the 90 days horizon QinetiQ Group plc is expected to generate 1.16 times more return on investment than Thales SA. However, QinetiQ Group is 1.16 times more volatile than Thales SA. It trades about 0.04 of its potential returns per unit of risk. Thales SA is currently generating about 0.03 per unit of risk. If you would invest  397.00  in QinetiQ Group plc on October 21, 2024 and sell it today you would earn a total of  113.00  from holding QinetiQ Group plc or generate 28.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.19%
Values	Daily Returns

QinetiQ Group plc  vs.  Thales SA

QinetiQ Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days QinetiQ Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Thales SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thales SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with QinetiQ Group and Thales SA

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

The idea behind QinetiQ Group plc and Thales SA 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.