Correlation Between Superior Plus and Delta Air

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

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

Diversification Opportunities for Superior Plus and Delta Air

-0.26

Correlation Coefficient

Superior Plus  Delta Air

Very good diversification

The 3 months correlation between Superior and Delta is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp 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 Superior Plus 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 Superior Plus Corp 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 Superior Plus i.e., Superior Plus and Delta Air go up and down completely randomly.

Pair Corralation between Superior Plus and Delta Air

Assuming the 90 days horizon Superior Plus Corp is expected to under-perform the Delta Air. But the stock apears to be less risky and, when comparing its historical volatility, Superior Plus Corp is 1.03 times less risky than Delta Air. The stock trades about -0.02 of its potential returns per unit of risk. The Delta Air Lines is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,956  in Delta Air Lines on December 5, 2024 and sell it today you would earn a total of  1,776  from holding Delta Air Lines or generate 44.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Superior Plus Corp  vs.  Delta Air Lines

Superior Plus Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Superior Plus is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Delta Air Lines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Air Lines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Superior Plus and Delta Air

The main advantage of trading using opposite Superior Plus and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus 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 Superior Plus Corp 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.

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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 .