Correlation Between DELTA AIR and TRAVEL LEISURE

Can any of the company-specific risk be diversified away by investing in both DELTA AIR and TRAVEL LEISURE 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 TRAVEL LEISURE 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 TRAVEL LEISURE DL 01, you can compare the effects of market volatilities on DELTA AIR and TRAVEL LEISURE 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 TRAVEL LEISURE. Check out your portfolio center. Please also check ongoing floating volatility patterns of DELTA AIR and TRAVEL LEISURE.

Diversification Opportunities for DELTA AIR and TRAVEL LEISURE

0.95

Correlation Coefficient

DELTA AIR  TRAVEL LEISURE

Almost no diversification

The 3 months correlation between DELTA and TRAVEL is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding DELTA AIR LINES and TRAVEL LEISURE DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRAVEL LEISURE DL 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 TRAVEL LEISURE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRAVEL LEISURE DL has no effect on the direction of DELTA AIR i.e., DELTA AIR and TRAVEL LEISURE go up and down completely randomly.

Pair Corralation between DELTA AIR and TRAVEL LEISURE

Assuming the 90 days trading horizon DELTA AIR LINES is expected to under-perform the TRAVEL LEISURE. In addition to that, DELTA AIR is 1.19 times more volatile than TRAVEL LEISURE DL 01. It trades about -0.12 of its total potential returns per unit of risk. TRAVEL LEISURE DL 01 is currently generating about -0.08 per unit of volatility. If you would invest  4,951  in TRAVEL LEISURE DL 01 on September 22, 2024 and sell it today you would lose (131.00) from holding TRAVEL LEISURE DL 01 or give up 2.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

DELTA AIR LINES  vs.  TRAVEL LEISURE DL 01

DELTA AIR LINES

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DELTA AIR LINES are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, DELTA AIR unveiled solid returns over the last few months and may actually be approaching a breakup point.

TRAVEL LEISURE DL

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in TRAVEL LEISURE DL 01 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAVEL LEISURE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DELTA AIR and TRAVEL LEISURE

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

The idea behind DELTA AIR LINES and TRAVEL LEISURE DL 01 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .