Correlation Between Tower Semiconductor and Delta Air

Can any of the company-specific risk be diversified away by investing in both Tower Semiconductor and Delta Air 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 Tower Semiconductor and Delta Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tower Semiconductor and Delta Air Lines, you can compare the effects of market volatilities on Tower Semiconductor and Delta Air 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 Tower Semiconductor with a short position of Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tower Semiconductor and Delta Air.

Diversification Opportunities for Tower Semiconductor and Delta Air

0.05

Correlation Coefficient

Tower Semiconductor  Delta Air

Significant diversification

The 3 months correlation between Tower and Delta is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Tower Semiconductor and Delta Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Air Lines and Tower Semiconductor 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 Tower Semiconductor are associated (or correlated) with Delta Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Air Lines has no effect on the direction of Tower Semiconductor i.e., Tower Semiconductor and Delta Air go up and down completely randomly.

Pair Corralation between Tower Semiconductor and Delta Air

Given the investment horizon of 90 days Tower Semiconductor is expected to under-perform the Delta Air. In addition to that, Tower Semiconductor is 1.26 times more volatile than Delta Air Lines. It trades about -0.05 of its total potential returns per unit of risk. Delta Air Lines is currently generating about -0.03 per unit of volatility. If you would invest  6,326  in Delta Air Lines on December 2, 2024 and sell it today you would lose (314.00) from holding Delta Air Lines or give up 4.96% of portfolio value over 90 days.

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

Tower Semiconductor  vs.  Delta Air Lines

Tower Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tower Semiconductor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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. Despite quite persistent basic indicators, Delta Air is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Tower Semiconductor and Delta Air

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

The idea behind Tower Semiconductor and Delta Air Lines 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.