Correlation Between Gold Road and Qantas Airways

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

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

Diversification Opportunities for Gold Road and Qantas Airways

0.65

Correlation Coefficient

Gold Road  Qantas Airways

Poor diversification

The 3 months correlation between Gold and Qantas is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and Qantas Airways Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qantas Airways and Gold Road 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 Gold Road Resources 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 Gold Road i.e., Gold Road and Qantas Airways go up and down completely randomly.

Pair Corralation between Gold Road and Qantas Airways

Assuming the 90 days horizon Gold Road is expected to generate 1.16 times less return on investment than Qantas Airways. In addition to that, Gold Road is 1.33 times more volatile than Qantas Airways Limited. It trades about 0.16 of its total potential returns per unit of risk. Qantas Airways Limited is currently generating about 0.25 per unit of volatility. If you would invest  409.00  in Qantas Airways Limited on September 4, 2024 and sell it today you would earn a total of  124.00  from holding Qantas Airways Limited or generate 30.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Gold Road Resources  vs.  Qantas Airways Limited

Gold Road Resources

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gold Road reported solid returns over the last few months and may actually be approaching a breakup point.

Qantas Airways

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qantas Airways Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Qantas Airways reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gold Road and Qantas Airways

The main advantage of trading using opposite Gold Road and Qantas Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Road 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 Gold Road Resources 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.

Check out your portfolio center.

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.