Correlation Between TAL Education and Delta Air

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

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

Diversification Opportunities for TAL Education and Delta Air

0.33

Correlation Coefficient

TAL Education  Delta Air

Weak diversification

The 3 months correlation between TAL and Delta is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding TAL Education Group and Delta Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Air Lines and TAL Education 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 TAL Education Group are associated (or correlated) with Delta Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Air Lines has no effect on the direction of TAL Education i.e., TAL Education and Delta Air go up and down completely randomly.

Pair Corralation between TAL Education and Delta Air

Assuming the 90 days trading horizon TAL Education Group is expected to generate 1.71 times more return on investment than Delta Air. However, TAL Education is 1.71 times more volatile than Delta Air Lines. It trades about 0.14 of its potential returns per unit of risk. Delta Air Lines is currently generating about 0.23 per unit of risk. If you would invest  428.00  in TAL Education Group on September 18, 2024 and sell it today you would earn a total of  174.00  from holding TAL Education Group or generate 40.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

TAL Education Group  vs.  Delta Air Lines

TAL Education Group

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days TAL Education Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak basic indicators, TAL Education sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with TAL Education and Delta Air

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

The idea behind TAL Education Group and Delta Air Lines 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.