Correlation Between Delta Air and Credicorp

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

Diversification Opportunities for Delta Air and Credicorp

0.85

Correlation Coefficient

Delta Air  Credicorp

Very poor diversification

The 3 months correlation between Delta and Credicorp is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Credicorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credicorp 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 Credicorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credicorp has no effect on the direction of Delta Air i.e., Delta Air and Credicorp go up and down completely randomly.

Pair Corralation between Delta Air and Credicorp

Assuming the 90 days trading horizon Delta Air is expected to generate 1.66 times less return on investment than Credicorp. But when comparing it to its historical volatility, Delta Air Lines is 1.92 times less risky than Credicorp. It trades about 0.12 of its potential returns per unit of risk. Credicorp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  218,118  in Credicorp on September 23, 2024 and sell it today you would earn a total of  145,882  from holding Credicorp or generate 66.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.21%
Values	Daily Returns

Delta Air Lines  vs.  Credicorp

Delta Air Lines

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Delta Air showed solid returns over the last few months and may actually be approaching a breakup point.

Credicorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Credicorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Credicorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Delta Air and Credicorp

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

The idea behind Delta Air Lines and Credicorp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.