Correlation Between INDIKA ENERGY and Qantas Airways

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

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

Diversification Opportunities for INDIKA ENERGY and Qantas Airways

-0.53

Correlation Coefficient

INDIKA ENERGY  Qantas Airways

Excellent diversification

The 3 months correlation between INDIKA and Qantas is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding INDIKA ENERGY and Qantas Airways Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qantas Airways and INDIKA ENERGY 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 INDIKA ENERGY 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 INDIKA ENERGY i.e., INDIKA ENERGY and Qantas Airways go up and down completely randomly.

Pair Corralation between INDIKA ENERGY and Qantas Airways

Assuming the 90 days trading horizon INDIKA ENERGY is expected to under-perform the Qantas Airways. But the stock apears to be less risky and, when comparing its historical volatility, INDIKA ENERGY is 2.01 times less risky than Qantas Airways. The stock trades about -0.05 of its potential returns per unit of risk. The Qantas Airways Limited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  419.00  in Qantas Airways Limited on September 1, 2024 and sell it today you would earn a total of  120.00  from holding Qantas Airways Limited or generate 28.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

INDIKA ENERGY  vs.  Qantas Airways Limited

INDIKA ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INDIKA ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, INDIKA ENERGY is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Qantas Airways

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qantas Airways Limited are ranked lower than 18 (%) 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 INDIKA ENERGY and Qantas Airways

The main advantage of trading using opposite INDIKA ENERGY and Qantas Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDIKA ENERGY 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 INDIKA ENERGY 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.