Correlation Between Delta Air and China Eastern

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

Diversification Opportunities for Delta Air and China Eastern

-0.22
  Correlation Coefficient

Very good diversification

The 3 months correlation between Delta and China is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and China Eastern Airlines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Eastern Airlines 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 China Eastern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Eastern Airlines has no effect on the direction of Delta Air i.e., Delta Air and China Eastern go up and down completely randomly.

Pair Corralation between Delta Air and China Eastern

Considering the 90-day investment horizon Delta Air is expected to generate 1.63 times less return on investment than China Eastern. But when comparing it to its historical volatility, Delta Air Lines is 1.03 times less risky than China Eastern. It trades about 0.03 of its potential returns per unit of risk. China Eastern Airlines is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,588  in China Eastern Airlines on December 30, 2023 and sell it today you would earn a total of  410.00  from holding China Eastern Airlines or generate 25.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy50.61%
ValuesDaily Returns

Delta Air Lines  vs.  China Eastern Airlines

 Performance 
       Timeline  
Delta Air Lines 

Risk-Adjusted Performance

11 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Delta Air disclosed solid returns over the last few months and may actually be approaching a breakup point.
China Eastern Airlines 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days China Eastern Airlines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, China Eastern is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Delta Air and China Eastern Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Delta Air and China Eastern

The main advantage of trading using opposite Delta Air and China Eastern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, China Eastern 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 China Eastern will offset losses from the drop in China Eastern's long position.
The idea behind Delta Air Lines and China Eastern Airlines 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.
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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