Correlation Between Delta Air and Dell Technologies

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

Diversification Opportunities for Delta Air and Dell Technologies

0.89

Correlation Coefficient

Delta Air  Dell Technologies

Very poor diversification

The 3 months correlation between Delta and Dell is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell Technologies 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 Dell Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dell Technologies has no effect on the direction of Delta Air i.e., Delta Air and Dell Technologies go up and down completely randomly.

Pair Corralation between Delta Air and Dell Technologies

Assuming the 90 days trading horizon Delta Air is expected to generate 1.72 times less return on investment than Dell Technologies. But when comparing it to its historical volatility, Delta Air Lines is 1.45 times less risky than Dell Technologies. It trades about 0.08 of its potential returns per unit of risk. Dell Technologies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  24,989  in Dell Technologies on September 12, 2024 and sell it today you would earn a total of  45,786  from holding Dell Technologies or generate 183.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	81.82%
Values	Daily Returns

Delta Air Lines  vs.  Dell Technologies

Delta Air Lines

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Delta Air sustained solid returns over the last few months and may actually be approaching a breakup point.

Dell Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dell Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Dell Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta Air and Dell Technologies

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

The idea behind Delta Air Lines and Dell Technologies 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.