Correlation Between Treasury Wine and Qantas Airways

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

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

Diversification Opportunities for Treasury Wine and Qantas Airways

-0.59

Correlation Coefficient

Treasury Wine  Qantas Airways

Excellent diversification

The 3 months correlation between Treasury and Qantas is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Treasury Wine Estates and Qantas Airways in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qantas Airways and Treasury Wine 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 Treasury Wine Estates 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 Treasury Wine i.e., Treasury Wine and Qantas Airways go up and down completely randomly.

Pair Corralation between Treasury Wine and Qantas Airways

Assuming the 90 days trading horizon Treasury Wine Estates is expected to under-perform the Qantas Airways. But the stock apears to be less risky and, when comparing its historical volatility, Treasury Wine Estates is 2.19 times less risky than Qantas Airways. The stock trades about -0.48 of its potential returns per unit of risk. The Qantas Airways is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  901.00  in Qantas Airways on October 11, 2024 and sell it today you would earn a total of  27.00  from holding Qantas Airways or generate 3.0% return on investment over 90 days.

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

Treasury Wine Estates  vs.  Qantas Airways

Treasury Wine Estates

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treasury Wine Estates has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Qantas Airways

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qantas Airways are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Qantas Airways unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Treasury Wine and Qantas Airways

The main advantage of trading using opposite Treasury Wine and Qantas Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treasury Wine 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 Treasury Wine Estates and Qantas Airways 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.