Correlation Between Delta Air and CDW Corp

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

Diversification Opportunities for Delta Air and CDW Corp

-0.84

Correlation Coefficient

Delta Air  CDW Corp

Pay attention - limited upside

The 3 months correlation between Delta and CDW is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and CDW Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corp 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 CDW Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDW Corp has no effect on the direction of Delta Air i.e., Delta Air and CDW Corp go up and down completely randomly.

Pair Corralation between Delta Air and CDW Corp

Considering the 90-day investment horizon Delta Air Lines is expected to under-perform the CDW Corp. In addition to that, Delta Air is 1.16 times more volatile than CDW Corp. It trades about -0.18 of its total potential returns per unit of risk. CDW Corp is currently generating about -0.18 per unit of volatility. If you would invest  18,246  in CDW Corp on October 8, 2024 and sell it today you would lose (823.00) from holding CDW Corp or give up 4.51% of portfolio value over 90 days.

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

Delta Air Lines  vs.  CDW Corp

Delta Air Lines

Risk-Adjusted Performance

10 of 100

Good

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

CDW Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDW Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Delta Air and CDW Corp

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

The idea behind Delta Air Lines and CDW Corp 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.