Correlation Between Valero Energy and Delta Air
Can any of the company-specific risk be diversified away by investing in both Valero Energy 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 Valero Energy and Delta Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valero Energy and Delta Air Lines, you can compare the effects of market volatilities on Valero Energy 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 Valero Energy with a short position of Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valero Energy and Delta Air.
Diversification Opportunities for Valero Energy and Delta Air
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Valero and Delta is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy 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 Valero Energy 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 Valero Energy 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 Valero Energy i.e., Valero Energy and Delta Air go up and down completely randomly.
Pair Corralation between Valero Energy and Delta Air
Assuming the 90 days trading horizon Valero Energy is expected to generate 4.01 times less return on investment than Delta Air. But when comparing it to its historical volatility, Valero Energy is 1.03 times less risky than Delta Air. It trades about 0.03 of its potential returns per unit of risk. Delta Air Lines is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 67,043 in Delta Air Lines on September 24, 2024 and sell it today you would earn a total of 55,257 from holding Delta Air Lines or generate 82.42% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Valero Energy vs. Delta Air Lines
Performance |
Timeline |
Valero Energy |
Delta Air Lines |
Valero Energy and Delta Air Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Valero Energy and Delta Air
The main advantage of trading using opposite Valero Energy and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valero Energy 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.Valero Energy vs. Monster Beverage Corp | Valero Energy vs. Amazon Inc | Valero Energy vs. Emerson Electric Co | Valero Energy vs. Tesla Inc |
Delta Air vs. Southern Copper | Delta Air vs. Micron Technology | Delta Air vs. Martin Marietta Materials | Delta Air vs. UnitedHealth Group Incorporated |
Check out your portfolio center.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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