Correlation Between Compal Electronics and Delta Air

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

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

Diversification Opportunities for Compal Electronics and Delta Air

0.0

Correlation Coefficient

Compal Electronics  Delta Air

Pay attention - limited upside

The 3 months correlation between Compal and Delta is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Compal Electronics GDR 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 Compal Electronics 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 Compal Electronics GDR 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 Compal Electronics i.e., Compal Electronics and Delta Air go up and down completely randomly.

Pair Corralation between Compal Electronics and Delta Air

Assuming the 90 days trading horizon Compal Electronics is expected to generate 3.51 times less return on investment than Delta Air. In addition to that, Compal Electronics is 1.43 times more volatile than Delta Air Lines. It trades about 0.02 of its total potential returns per unit of risk. Delta Air Lines is currently generating about 0.08 per unit of volatility. If you would invest  4,165  in Delta Air Lines on October 6, 2024 and sell it today you would earn a total of  1,633  from holding Delta Air Lines or generate 39.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Compal Electronics GDR  vs.  Delta Air Lines

Compal Electronics GDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compal Electronics GDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Compal Electronics is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Compal Electronics and Delta Air

The main advantage of trading using opposite Compal Electronics and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compal Electronics 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 Compal Electronics GDR 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.