Correlation Between Delta Air and American International
Can any of the company-specific risk be diversified away by investing in both Delta Air and American International 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 American International 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 American International Group, you can compare the effects of market volatilities on Delta Air and American International 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 American International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and American International.
Diversification Opportunities for Delta Air and American International
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Delta and American is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and American International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American International 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 American International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American International has no effect on the direction of Delta Air i.e., Delta Air and American International go up and down completely randomly.
Pair Corralation between Delta Air and American International
Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.71 times more return on investment than American International. However, Delta Air is 1.71 times more volatile than American International Group. It trades about 0.08 of its potential returns per unit of risk. American International Group is currently generating about 0.05 per unit of risk. If you would invest 62,319 in Delta Air Lines on September 24, 2024 and sell it today you would earn a total of 61,416 from holding Delta Air Lines or generate 98.55% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 99.6% |
Values | Daily Returns |
Delta Air Lines vs. American International Group
Performance |
Timeline |
Delta Air Lines |
American International |
Delta Air and American International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Delta Air and American International
The main advantage of trading using opposite Delta Air and American International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, American International 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 American International will offset losses from the drop in American International's long position.Delta Air vs. Southern Copper | Delta Air vs. Micron Technology | Delta Air vs. Martin Marietta Materials | Delta Air vs. UnitedHealth Group Incorporated |
American International vs. Delta Air Lines | American International vs. Monster Beverage Corp | American International vs. McEwen Mining | American International vs. Taiwan Semiconductor Manufacturing |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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