Correlation Between Delta Air and BBAI WT

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

Diversification Opportunities for Delta Air and BBAI WT

0.55

Correlation Coefficient

Delta Air  BBAI WT

Very weak diversification

The 3 months correlation between Delta and BBAI is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and BBAI WT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBAI WT 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 BBAI WT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBAI WT has no effect on the direction of Delta Air i.e., Delta Air and BBAI WT go up and down completely randomly.

Pair Corralation between Delta Air and BBAI WT

Considering the 90-day investment horizon Delta Air Lines is expected to under-perform the BBAI WT. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 12.23 times less risky than BBAI WT. The stock trades about -0.12 of its potential returns per unit of risk. The BBAI WT is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  18.00  in BBAI WT on September 14, 2024 and sell it today you would earn a total of  55.00  from holding BBAI WT or generate 305.56% return on investment over 90 days.

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

Delta Air Lines  vs.  BBAI WT

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 quite conflicting basic indicators, Delta Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

BBAI WT

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BBAI WT are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, BBAI WT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta Air and BBAI WT

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

The idea behind Delta Air Lines and BBAI WT 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.