Correlation Between Delta Air and DevEx Resources

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

Diversification Opportunities for Delta Air and DevEx Resources

-0.74

Correlation Coefficient

Delta Air  DevEx Resources

Pay attention - limited upside

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

Pair Corralation between Delta Air and DevEx Resources

Assuming the 90 days horizon Delta Air is expected to generate 2.15 times less return on investment than DevEx Resources. But when comparing it to its historical volatility, Delta Air Lines is 4.81 times less risky than DevEx Resources. It trades about 0.06 of its potential returns per unit of risk. DevEx Resources Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  17.00  in DevEx Resources Limited on October 11, 2024 and sell it today you would lose (11.35) from holding DevEx Resources Limited or give up 66.76% of portfolio value over 90 days.

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

Delta Air Lines  vs.  DevEx Resources Limited

Delta Air Lines

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Delta Air reported solid returns over the last few months and may actually be approaching a breakup point.

DevEx Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DevEx Resources Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DevEx Resources is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Delta Air and DevEx Resources

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

The idea behind Delta Air Lines and DevEx Resources Limited 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.