Correlation Between Delta Air and MSAD Insurance

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

Diversification Opportunities for Delta Air and MSAD Insurance

-0.05

Correlation Coefficient

Delta Air  MSAD Insurance

Good diversification

The 3 months correlation between Delta and MSAD is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and MSAD Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSAD Insurance Group 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 MSAD Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSAD Insurance Group has no effect on the direction of Delta Air i.e., Delta Air and MSAD Insurance go up and down completely randomly.

Pair Corralation between Delta Air and MSAD Insurance

Considering the 90-day investment horizon Delta Air is expected to generate 1.22 times less return on investment than MSAD Insurance. But when comparing it to its historical volatility, Delta Air Lines is 1.02 times less risky than MSAD Insurance. It trades about 0.07 of its potential returns per unit of risk. MSAD Insurance Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,018  in MSAD Insurance Group on September 13, 2024 and sell it today you would earn a total of  1,235  from holding MSAD Insurance Group or generate 121.32% 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.  MSAD Insurance Group

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.

MSAD Insurance Group

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days MSAD Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, MSAD Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Delta Air and MSAD Insurance

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

The idea behind Delta Air Lines and MSAD Insurance Group 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.