Correlation Between Delta Air and United Parks

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

Diversification Opportunities for Delta Air and United Parks

0.9

Correlation Coefficient

Delta Air  United Parks

Almost no diversification

The 3 months correlation between Delta and United is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and United Parks Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parks Resorts 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 United Parks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parks Resorts has no effect on the direction of Delta Air i.e., Delta Air and United Parks go up and down completely randomly.

Pair Corralation between Delta Air and United Parks

Considering the 90-day investment horizon Delta Air Lines is expected to under-perform the United Parks. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 1.1 times less risky than United Parks. The stock trades about -0.18 of its potential returns per unit of risk. The United Parks Resorts is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  5,662  in United Parks Resorts on September 24, 2024 and sell it today you would lose (254.00) from holding United Parks Resorts or give up 4.49% of portfolio value over 90 days.

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

Delta Air Lines  vs.  United Parks Resorts

Delta Air Lines

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 13 (%) 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.

United Parks Resorts

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Parks Resorts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward-looking signals, United Parks may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Delta Air and United Parks

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

The idea behind Delta Air Lines and United Parks Resorts 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.