Correlation Between Qantas Airways and LVMH Moët

Can any of the company-specific risk be diversified away by investing in both Qantas Airways and LVMH Moët 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 LVMH Moët 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 LVMH Mot Hennessy, you can compare the effects of market volatilities on Qantas Airways and LVMH Moët 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 LVMH Moët. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qantas Airways and LVMH Moët.

Diversification Opportunities for Qantas Airways and LVMH Moët

-0.36

Correlation Coefficient

Qantas Airways  LVMH Moët

Very good diversification

The 3 months correlation between Qantas and LVMH is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Qantas Airways Limited and LVMH Mot Hennessy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LVMH Mot Hennessy 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 LVMH Moët. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVMH Mot Hennessy has no effect on the direction of Qantas Airways i.e., Qantas Airways and LVMH Moët go up and down completely randomly.

Pair Corralation between Qantas Airways and LVMH Moët

Assuming the 90 days horizon Qantas Airways Limited is expected to under-perform the LVMH Moët. But the stock apears to be less risky and, when comparing its historical volatility, Qantas Airways Limited is 1.72 times less risky than LVMH Moët. The stock trades about -0.09 of its potential returns per unit of risk. The LVMH Mot Hennessy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  11,483  in LVMH Mot Hennessy on September 23, 2024 and sell it today you would earn a total of  817.00  from holding LVMH Mot Hennessy or generate 7.11% return on investment over 90 days.

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

Qantas Airways Limited  vs.  LVMH Mot Hennessy

Qantas Airways

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Qantas Airways Limited are ranked lower than 12 (%) 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.

LVMH Mot Hennessy

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days LVMH Mot Hennessy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak technical indicators, LVMH Moët may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Qantas Airways and LVMH Moët

The main advantage of trading using opposite Qantas Airways and LVMH Moët positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qantas Airways position performs unexpectedly, LVMH Moët 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 LVMH Moët will offset losses from the drop in LVMH Moët's long position.

The idea behind Qantas Airways Limited and LVMH Mot Hennessy 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.