Correlation Between Delta Air and Tower Semiconductor

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

Diversification Opportunities for Delta Air and Tower Semiconductor

0.74

Correlation Coefficient

Delta Air  Tower Semiconductor

Poor diversification

The 3 months correlation between Delta and Tower is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor 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 Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of Delta Air i.e., Delta Air and Tower Semiconductor go up and down completely randomly.

Pair Corralation between Delta Air and Tower Semiconductor

Considering the 90-day investment horizon Delta Air Lines is expected to under-perform the Tower Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 1.1 times less risky than Tower Semiconductor. The stock trades about -0.14 of its potential returns per unit of risk. The Tower Semiconductor is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  5,086  in Tower Semiconductor on December 21, 2024 and sell it today you would lose (1,221) from holding Tower Semiconductor or give up 24.01% of portfolio value over 90 days.

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

Delta Air Lines  vs.  Tower Semiconductor

Delta Air Lines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Air Lines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Tower Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tower Semiconductor 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 technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Delta Air and Tower Semiconductor

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

The idea behind Delta Air Lines and Tower Semiconductor 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..