Correlation Between DELTA AIR and GUARDANT HEALTH

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

Diversification Opportunities for DELTA AIR and GUARDANT HEALTH

0.88

Correlation Coefficient

DELTA AIR  GUARDANT HEALTH

Very poor diversification

The 3 months correlation between DELTA and GUARDANT is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding DELTA AIR LINES and GUARDANT HEALTH CL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GUARDANT HEALTH CL 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 GUARDANT HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GUARDANT HEALTH CL has no effect on the direction of DELTA AIR i.e., DELTA AIR and GUARDANT HEALTH go up and down completely randomly.

Pair Corralation between DELTA AIR and GUARDANT HEALTH

Assuming the 90 days trading horizon DELTA AIR is expected to generate 2.17 times less return on investment than GUARDANT HEALTH. In addition to that, DELTA AIR is 1.01 times more volatile than GUARDANT HEALTH CL. It trades about 0.18 of its total potential returns per unit of risk. GUARDANT HEALTH CL is currently generating about 0.4 per unit of volatility. If you would invest  3,044  in GUARDANT HEALTH CL on October 23, 2024 and sell it today you would earn a total of  574.00  from holding GUARDANT HEALTH CL or generate 18.86% return on investment over 90 days.

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

DELTA AIR LINES  vs.  GUARDANT HEALTH CL

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. In spite of comparatively uncertain basic indicators, DELTA AIR unveiled solid returns over the last few months and may actually be approaching a breakup point.

GUARDANT HEALTH CL

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GUARDANT HEALTH CL are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GUARDANT HEALTH reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DELTA AIR and GUARDANT HEALTH

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

The idea behind DELTA AIR LINES and GUARDANT HEALTH CL 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.