Correlation Between DELTA AIR and SBM OFFSHORE

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

Diversification Opportunities for DELTA AIR and SBM OFFSHORE

0.6

Correlation Coefficient

DELTA AIR  SBM OFFSHORE

Poor diversification

The 3 months correlation between DELTA and SBM is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding DELTA AIR LINES and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE 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 SBM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM OFFSHORE has no effect on the direction of DELTA AIR i.e., DELTA AIR and SBM OFFSHORE go up and down completely randomly.

Pair Corralation between DELTA AIR and SBM OFFSHORE

Assuming the 90 days trading horizon DELTA AIR LINES is expected to generate 1.21 times more return on investment than SBM OFFSHORE. However, DELTA AIR is 1.21 times more volatile than SBM OFFSHORE. It trades about -0.02 of its potential returns per unit of risk. SBM OFFSHORE is currently generating about -0.28 per unit of risk. If you would invest  5,920  in DELTA AIR LINES on September 20, 2024 and sell it today you would lose (69.00) from holding DELTA AIR LINES or give up 1.17% 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.  SBM OFFSHORE

DELTA AIR LINES

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DELTA AIR LINES are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, DELTA AIR unveiled solid returns over the last few months and may actually be approaching a breakup point.

SBM OFFSHORE

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with DELTA AIR and SBM OFFSHORE

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

The idea behind DELTA AIR LINES and SBM OFFSHORE 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.