Correlation Between Delta Air and G8 EDUCATION

Can any of the company-specific risk be diversified away by investing in both Delta Air and G8 EDUCATION 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 G8 EDUCATION 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 G8 EDUCATION, you can compare the effects of market volatilities on Delta Air and G8 EDUCATION 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 G8 EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and G8 EDUCATION.

Diversification Opportunities for Delta Air and G8 EDUCATION

-0.41

Correlation Coefficient

Delta Air  G8 EDUCATION

Very good diversification

The 3 months correlation between Delta and 3EAG is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and G8 EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 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 G8 EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 EDUCATION has no effect on the direction of Delta Air i.e., Delta Air and G8 EDUCATION go up and down completely randomly.

Pair Corralation between Delta Air and G8 EDUCATION

Assuming the 90 days horizon Delta Air Lines is expected to generate 1.54 times more return on investment than G8 EDUCATION. However, Delta Air is 1.54 times more volatile than G8 EDUCATION. It trades about 0.16 of its potential returns per unit of risk. G8 EDUCATION is currently generating about -0.03 per unit of risk. If you would invest  5,051  in Delta Air Lines on October 23, 2024 and sell it today you would earn a total of  1,319  from holding Delta Air Lines or generate 26.11% return on investment over 90 days.

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

Delta Air Lines  vs.  G8 EDUCATION

Delta Air Lines

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Delta Air reported solid returns over the last few months and may actually be approaching a breakup point.

G8 EDUCATION

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G8 EDUCATION has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, G8 EDUCATION is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Delta Air and G8 EDUCATION

The main advantage of trading using opposite Delta Air and G8 EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, G8 EDUCATION 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 G8 EDUCATION will offset losses from the drop in G8 EDUCATION's long position.

The idea behind Delta Air Lines and G8 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.