Correlation Between Delta Air and New Oriental

Can any of the company-specific risk be diversified away by investing in both Delta Air and New Oriental 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 Delta Air and New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Delta Air Lines and New Oriental Education, you can compare the effects of market volatilities on Delta Air and New Oriental 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 Delta Air with a short position of New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and New Oriental.

Diversification Opportunities for Delta Air and New Oriental

-0.3

Correlation Coefficient

Delta Air  New Oriental

Very good diversification

The 3 months correlation between Delta and New is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education and Delta Air 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 Delta Air Lines are associated (or correlated) with New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of Delta Air i.e., Delta Air and New Oriental go up and down completely randomly.

Pair Corralation between Delta Air and New Oriental

Assuming the 90 days trading horizon Delta Air Lines is expected to generate 0.75 times more return on investment than New Oriental. However, Delta Air Lines is 1.34 times less risky than New Oriental. It trades about 0.23 of its potential returns per unit of risk. New Oriental Education is currently generating about 0.05 per unit of risk. If you would invest  25,619  in Delta Air Lines on September 18, 2024 and sell it today you would earn a total of  11,279  from holding Delta Air Lines or generate 44.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Delta Air Lines  vs.  New Oriental Education

Delta Air Lines

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Delta Air sustained solid returns over the last few months and may actually be approaching a breakup point.

New Oriental Education

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in New Oriental Education are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, New Oriental may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Delta Air and New Oriental

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

The idea behind Delta Air Lines and New Oriental Education 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.