Correlation Between Qantas Airways and Ryanair Holdings

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Can any of the company-specific risk be diversified away by investing in both Qantas Airways and Ryanair 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 Ryanair Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Qantas Airways Limited and Ryanair Holdings PLC, you can compare the effects of market volatilities on Qantas Airways and Ryanair 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 Ryanair Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qantas Airways and Ryanair Holdings.

Diversification Opportunities for Qantas Airways and Ryanair Holdings

-0.13
  Correlation Coefficient

Good diversification

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

Pair Corralation between Qantas Airways and Ryanair Holdings

If you would invest  340.00  in Qantas Airways Limited on December 30, 2023 and sell it today you would earn a total of  10.00  from holding Qantas Airways Limited or generate 2.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Qantas Airways Limited  vs.  Ryanair Holdings PLC

 Performance 
       Timeline  
Qantas Airways 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Qantas Airways Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Qantas Airways is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Ryanair Holdings PLC 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings PLC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Ryanair Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Qantas Airways and Ryanair Holdings Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Qantas Airways and Ryanair Holdings

The main advantage of trading using opposite Qantas Airways and Ryanair Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qantas Airways position performs unexpectedly, Ryanair 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 Ryanair Holdings will offset losses from the drop in Ryanair Holdings' long position.
The idea behind Qantas Airways Limited and Ryanair Holdings PLC 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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