Correlation Between Delta Air and Livermore Investments

Can any of the company-specific risk be diversified away by investing in both Delta Air and Livermore Investments 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 Livermore Investments 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 Livermore Investments Group, you can compare the effects of market volatilities on Delta Air and Livermore Investments 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 Livermore Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Livermore Investments.

Diversification Opportunities for Delta Air and Livermore Investments

0.61

Correlation Coefficient

Delta Air  Livermore Investments

Poor diversification

The 3 months correlation between Delta and Livermore is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Livermore Investments Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livermore Investments 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 Livermore Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livermore Investments has no effect on the direction of Delta Air i.e., Delta Air and Livermore Investments go up and down completely randomly.

Pair Corralation between Delta Air and Livermore Investments

Assuming the 90 days trading horizon Delta Air Lines is expected to under-perform the Livermore Investments. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 2.87 times less risky than Livermore Investments. The stock trades about -0.49 of its potential returns per unit of risk. The Livermore Investments Group is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,530  in Livermore Investments Group on October 6, 2024 and sell it today you would earn a total of  530.00  from holding Livermore Investments Group or generate 11.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Delta Air Lines  vs.  Livermore Investments Group

Delta Air Lines

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Delta Air unveiled solid returns over the last few months and may actually be approaching a breakup point.

Livermore Investments

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Livermore Investments Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Livermore Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta Air and Livermore Investments

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

The idea behind Delta Air Lines and Livermore Investments Group 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.