Correlation Between NASD Unchanged and Delek Logistics

Can any of the company-specific risk be diversified away by investing in both NASD Unchanged and Delek Logistics 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 NASD Unchanged and Delek Logistics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NASD Unchanged Stocks and Delek Logistics Partners, you can compare the effects of market volatilities on NASD Unchanged and Delek Logistics 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 NASD Unchanged with a short position of Delek Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of NASD Unchanged and Delek Logistics.

Diversification Opportunities for NASD Unchanged and Delek Logistics

-0.06

Correlation Coefficient

NASD Unchanged  Delek Logistics

Good diversification

The 3 months correlation between NASD and Delek is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding NASD Unchanged Stocks and Delek Logistics Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Logistics Partners and NASD Unchanged 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 NASD Unchanged Stocks are associated (or correlated) with Delek Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Logistics Partners has no effect on the direction of NASD Unchanged i.e., NASD Unchanged and Delek Logistics go up and down completely randomly.

Pair Corralation between NASD Unchanged and Delek Logistics

Assuming the 90 days trading horizon NASD Unchanged Stocks is expected to generate 33.74 times more return on investment than Delek Logistics. However, NASD Unchanged is 33.74 times more volatile than Delek Logistics Partners. It trades about 0.09 of its potential returns per unit of risk. Delek Logistics Partners is currently generating about 0.32 per unit of risk. If you would invest  7,600  in NASD Unchanged Stocks on October 10, 2024 and sell it today you would lose (1,500) from holding NASD Unchanged Stocks or give up 19.74% of portfolio value over 90 days.

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

NASD Unchanged Stocks  vs.  Delek Logistics Partners

Pair Trading with NASD Unchanged and Delek Logistics

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

The idea behind NASD Unchanged Stocks and Delek Logistics Partners 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.