Correlation Between DELTA AIR and Quaker Chemical

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

Diversification Opportunities for DELTA AIR and Quaker Chemical

0.23

Correlation Coefficient

DELTA AIR  Quaker Chemical

Modest diversification

The 3 months correlation between DELTA and Quaker is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding DELTA AIR LINES and Quaker Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quaker Chemical 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 Quaker Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quaker Chemical has no effect on the direction of DELTA AIR i.e., DELTA AIR and Quaker Chemical go up and down completely randomly.

Pair Corralation between DELTA AIR and Quaker Chemical

Assuming the 90 days trading horizon DELTA AIR LINES is expected to generate 0.98 times more return on investment than Quaker Chemical. However, DELTA AIR LINES is 1.03 times less risky than Quaker Chemical. It trades about 0.06 of its potential returns per unit of risk. Quaker Chemical is currently generating about -0.02 per unit of risk. If you would invest  3,529  in DELTA AIR LINES on October 11, 2024 and sell it today you would earn a total of  2,417  from holding DELTA AIR LINES or generate 68.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

DELTA AIR LINES  vs.  Quaker Chemical

DELTA AIR LINES

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DELTA AIR LINES are ranked lower than 14 (%) 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.

Quaker Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quaker Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with DELTA AIR and Quaker Chemical

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

The idea behind DELTA AIR LINES and Quaker Chemical 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.