Correlation Between Delta Air and Coca Cola

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

Diversification Opportunities for Delta Air and Coca Cola

-0.74

Correlation Coefficient

Delta Air  Coca Cola

Pay attention - limited upside

The 3 months correlation between Delta and Coca is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Coca Cola FEMSA SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola FEMSA 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola FEMSA has no effect on the direction of Delta Air i.e., Delta Air and Coca Cola go up and down completely randomly.

Pair Corralation between Delta Air and Coca Cola

Assuming the 90 days trading horizon Delta Air Lines is expected to generate 2.11 times more return on investment than Coca Cola. However, Delta Air is 2.11 times more volatile than Coca Cola FEMSA SAB. It trades about 0.15 of its potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about -0.14 per unit of risk. If you would invest  101,398  in Delta Air Lines on September 26, 2024 and sell it today you would earn a total of  25,168  from holding Delta Air Lines or generate 24.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Delta Air Lines  vs.  Coca Cola FEMSA SAB

Delta Air Lines

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Delta Air showed solid returns over the last few months and may actually be approaching a breakup point.

Coca Cola FEMSA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coca Cola FEMSA SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Delta Air and Coca Cola

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

The idea behind Delta Air Lines and Coca Cola FEMSA SAB 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.