Correlation Between DELTA AIR and Carnegie Clean

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

Diversification Opportunities for DELTA AIR and Carnegie Clean

0.25

Correlation Coefficient

DELTA AIR  Carnegie Clean

Modest diversification

The 3 months correlation between DELTA and Carnegie is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding DELTA AIR LINES and Carnegie Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnegie Clean Energy 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 Carnegie Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnegie Clean Energy has no effect on the direction of DELTA AIR i.e., DELTA AIR and Carnegie Clean go up and down completely randomly.

Pair Corralation between DELTA AIR and Carnegie Clean

Assuming the 90 days trading horizon DELTA AIR LINES is expected to under-perform the Carnegie Clean. But the stock apears to be less risky and, when comparing its historical volatility, DELTA AIR LINES is 2.05 times less risky than Carnegie Clean. The stock trades about -0.09 of its potential returns per unit of risk. The Carnegie Clean Energy is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2.22  in Carnegie Clean Energy on December 5, 2024 and sell it today you would lose (0.22) from holding Carnegie Clean Energy or give up 9.91% of portfolio value over 90 days.

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

DELTA AIR LINES  vs.  Carnegie Clean Energy

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. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Carnegie Clean Energy

Risk-Adjusted Performance

Very Weak

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

Pair Trading with DELTA AIR and Carnegie Clean

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

The idea behind DELTA AIR LINES and Carnegie Clean Energy 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.