Correlation Between Delta Air and Bright Scholar

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

Diversification Opportunities for Delta Air and Bright Scholar

-0.65

Correlation Coefficient

Delta Air  Bright Scholar

Excellent diversification

The 3 months correlation between Delta and Bright is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Bright Scholar Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Scholar Education 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 Bright Scholar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Scholar Education has no effect on the direction of Delta Air i.e., Delta Air and Bright Scholar go up and down completely randomly.

Pair Corralation between Delta Air and Bright Scholar

Considering the 90-day investment horizon Delta Air Lines is expected to under-perform the Bright Scholar. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 1.68 times less risky than Bright Scholar. The stock trades about -0.13 of its potential returns per unit of risk. The Bright Scholar Education is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  186.00  in Bright Scholar Education on September 21, 2024 and sell it today you would earn a total of  6.00  from holding Bright Scholar Education or generate 3.23% return on investment over 90 days.

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

Delta Air Lines  vs.  Bright Scholar Education

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. Despite quite conflicting basic indicators, Delta Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bright Scholar Education

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bright Scholar Education has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Delta Air and Bright Scholar

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

The idea behind Delta Air Lines and Bright Scholar Education 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.