Correlation Between Delta Air and SST WT

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

Diversification Opportunities for Delta Air and SST WT

0.11

Correlation Coefficient

Delta Air  SST WT

Average diversification

The 3 months correlation between Delta and SST is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and SST WT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SST WT 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 SST WT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SST WT has no effect on the direction of Delta Air i.e., Delta Air and SST WT go up and down completely randomly.

Pair Corralation between Delta Air and SST WT

Considering the 90-day investment horizon Delta Air Lines is expected to generate 0.15 times more return on investment than SST WT. However, Delta Air Lines is 6.74 times less risky than SST WT. It trades about 0.07 of its potential returns per unit of risk. SST WT is currently generating about -0.49 per unit of risk. If you would invest  3,235  in Delta Air Lines on September 20, 2024 and sell it today you would earn a total of  2,803  from holding Delta Air Lines or generate 86.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.41%
Values	Daily Returns

Delta Air Lines  vs.  SST WT

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.

SST WT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SST WT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Delta Air and SST WT

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

The idea behind Delta Air Lines and SST WT 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.