Correlation Between Escalade Incorporated and Delta Apparel

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

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

Diversification Opportunities for Escalade Incorporated and Delta Apparel

0.77

Correlation Coefficient

Escalade Incorporated  Delta Apparel

Poor diversification

The 3 months correlation between Escalade and Delta is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Escalade Incorporated and Delta Apparel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Apparel and Escalade Incorporated 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 Escalade Incorporated are associated (or correlated) with Delta Apparel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Apparel has no effect on the direction of Escalade Incorporated i.e., Escalade Incorporated and Delta Apparel go up and down completely randomly.

Pair Corralation between Escalade Incorporated and Delta Apparel

Given the investment horizon of 90 days Escalade Incorporated is expected to generate 1.2 times more return on investment than Delta Apparel. However, Escalade Incorporated is 1.2 times more volatile than Delta Apparel. It trades about 0.04 of its potential returns per unit of risk. Delta Apparel is currently generating about -0.11 per unit of risk. If you would invest  1,288  in Escalade Incorporated on February 4, 2024 and sell it today you would earn a total of  32.00  from holding Escalade Incorporated or generate 2.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Escalade Incorporated  vs.  Delta Apparel

Escalade Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Escalade Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Delta Apparel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delta Apparel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Escalade Incorporated and Delta Apparel

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

The idea behind Escalade Incorporated and Delta Apparel 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.