Correlation Between Delta Air and STMicroelectronics
Can any of the company-specific risk be diversified away by investing in both Delta Air and STMicroelectronics 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 STMicroelectronics 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 STMicroelectronics NV, you can compare the effects of market volatilities on Delta Air and STMicroelectronics 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 STMicroelectronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and STMicroelectronics.
Diversification Opportunities for Delta Air and STMicroelectronics
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Delta and STMicroelectronics is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Delta Air i.e., Delta Air and STMicroelectronics go up and down completely randomly.
Pair Corralation between Delta Air and STMicroelectronics
Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.06 times more return on investment than STMicroelectronics. However, Delta Air is 1.06 times more volatile than STMicroelectronics NV. It trades about 0.17 of its potential returns per unit of risk. STMicroelectronics NV is currently generating about -0.03 per unit of risk. If you would invest 5,406 in Delta Air Lines on October 25, 2024 and sell it today you would earn a total of 1,375 from holding Delta Air Lines or generate 25.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 98.39% |
Values | Daily Returns |
Delta Air Lines vs. STMicroelectronics NV
Performance |
Timeline |
Delta Air Lines |
STMicroelectronics |
Delta Air and STMicroelectronics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Delta Air and STMicroelectronics
The main advantage of trading using opposite Delta Air and STMicroelectronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, STMicroelectronics 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 STMicroelectronics will offset losses from the drop in STMicroelectronics' long position.Delta Air vs. Leroy Seafood Group | Delta Air vs. United Airlines Holdings | Delta Air vs. Norwegian Air Shuttle | Delta Air vs. Evolution Gaming Group |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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