Correlation Between Tsingtao Brewery and Qantas Airways

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

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

Diversification Opportunities for Tsingtao Brewery and Qantas Airways

-0.55

Correlation Coefficient

Tsingtao Brewery  Qantas Airways

Excellent diversification

The 3 months correlation between Tsingtao and Qantas is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Tsingtao Brewery and Qantas Airways Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qantas Airways and Tsingtao Brewery 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 Tsingtao Brewery 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 Tsingtao Brewery i.e., Tsingtao Brewery and Qantas Airways go up and down completely randomly.

Pair Corralation between Tsingtao Brewery and Qantas Airways

Assuming the 90 days trading horizon Tsingtao Brewery is expected to generate 2.38 times more return on investment than Qantas Airways. However, Tsingtao Brewery is 2.38 times more volatile than Qantas Airways Limited. It trades about 0.07 of its potential returns per unit of risk. Qantas Airways Limited is currently generating about 0.12 per unit of risk. If you would invest  362.00  in Tsingtao Brewery on October 6, 2024 and sell it today you would earn a total of  302.00  from holding Tsingtao Brewery or generate 83.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Tsingtao Brewery  vs.  Qantas Airways Limited

Tsingtao Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tsingtao Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Qantas Airways

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qantas Airways Limited are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Qantas Airways reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tsingtao Brewery and Qantas Airways

The main advantage of trading using opposite Tsingtao Brewery and Qantas Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tsingtao Brewery 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 Tsingtao Brewery 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.