Correlation Between Delta Air and Mattel

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

Diversification Opportunities for Delta Air and Mattel

-0.15

Correlation Coefficient

Delta Air  Mattel

Good diversification

The 3 months correlation between Delta and Mattel is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Mattel Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mattel Inc 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 Mattel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mattel Inc has no effect on the direction of Delta Air i.e., Delta Air and Mattel go up and down completely randomly.

Pair Corralation between Delta Air and Mattel

Considering the 90-day investment horizon Delta Air Lines is expected to generate 1.18 times more return on investment than Mattel. However, Delta Air is 1.18 times more volatile than Mattel Inc. It trades about 0.19 of its potential returns per unit of risk. Mattel Inc is currently generating about -0.04 per unit of risk. If you would invest  4,680  in Delta Air Lines on September 20, 2024 and sell it today you would earn a total of  1,401  from holding Delta Air Lines or generate 29.94% return on investment over 90 days.

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

Delta Air Lines  vs.  Mattel Inc

Delta Air Lines

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 15 (%) 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.

Mattel Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mattel Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mattel is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Delta Air and Mattel

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

The idea behind Delta Air Lines and Mattel Inc 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.