Correlation Between Global X and Delta Air

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

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

Diversification Opportunities for Global X and Delta Air

0.93

Correlation Coefficient

Global X  Delta Air

Almost no diversification

The 3 months correlation between Global and Delta is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds 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 Global X 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 Global X Funds 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 Global X i.e., Global X and Delta Air go up and down completely randomly.

Pair Corralation between Global X and Delta Air

Assuming the 90 days trading horizon Global X is expected to generate 2.69 times less return on investment than Delta Air. But when comparing it to its historical volatility, Global X Funds is 1.74 times less risky than Delta Air. It trades about 0.14 of its potential returns per unit of risk. Delta Air Lines is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  26,035  in Delta Air Lines on September 24, 2024 and sell it today you would earn a total of  11,091  from holding Delta Air Lines or generate 42.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Global X Funds  vs.  Delta Air Lines

Global X Funds

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global X sustained solid returns over the last few months and may actually be approaching a breakup point.

Delta Air Lines

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Delta Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and Delta Air

The main advantage of trading using opposite Global X and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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.

The idea behind Global X Funds and Delta Air Lines 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.