Correlation Between DELTA AIR and Chongqing Machinery
Can any of the company-specific risk be diversified away by investing in both DELTA AIR and Chongqing Machinery 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 Chongqing Machinery 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 Chongqing Machinery Electric, you can compare the effects of market volatilities on DELTA AIR and Chongqing Machinery 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 Chongqing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of DELTA AIR and Chongqing Machinery.
Diversification Opportunities for DELTA AIR and Chongqing Machinery
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DELTA and Chongqing is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding DELTA AIR LINES and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery 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 Chongqing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Machinery has no effect on the direction of DELTA AIR i.e., DELTA AIR and Chongqing Machinery go up and down completely randomly.
Pair Corralation between DELTA AIR and Chongqing Machinery
Assuming the 90 days trading horizon DELTA AIR LINES is expected to generate 0.85 times more return on investment than Chongqing Machinery. However, DELTA AIR LINES is 1.18 times less risky than Chongqing Machinery. It trades about 0.28 of its potential returns per unit of risk. Chongqing Machinery Electric is currently generating about 0.09 per unit of risk. If you would invest 4,596 in DELTA AIR LINES on August 28, 2024 and sell it today you would earn a total of 1,544 from holding DELTA AIR LINES or generate 33.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DELTA AIR LINES vs. Chongqing Machinery Electric
Performance |
| Timeline |
| DELTA AIR LINES |
| Chongqing Machinery |
DELTA AIR and Chongqing Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DELTA AIR and Chongqing Machinery
The main advantage of trading using opposite DELTA AIR and Chongqing Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DELTA AIR position performs unexpectedly, Chongqing Machinery 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 Chongqing Machinery will offset losses from the drop in Chongqing Machinery's long position.| DELTA AIR vs. FUYO GENERAL LEASE | DELTA AIR vs. Sixt Leasing SE | DELTA AIR vs. ALBIS LEASING AG | DELTA AIR vs. Gol Intelligent Airlines |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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