Correlation Between Walmart and Delta Air

Can any of the company-specific risk be diversified away by investing in both Walmart and Delta Air 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 Walmart and Delta Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and Delta Air Lines, you can compare the effects of market volatilities on Walmart and Delta Air 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 Walmart with a short position of Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Delta Air.

Diversification Opportunities for Walmart and Delta Air

0.85

Correlation Coefficient

Walmart  Delta Air

Very poor diversification

The 3 months correlation between Walmart and Delta is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Delta Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Air Lines and Walmart 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 Walmart are associated (or correlated) with Delta Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Air Lines has no effect on the direction of Walmart i.e., Walmart and Delta Air go up and down completely randomly.

Pair Corralation between Walmart and Delta Air

Assuming the 90 days trading horizon Walmart is expected to generate 0.52 times more return on investment than Delta Air. However, Walmart is 1.93 times less risky than Delta Air. It trades about -0.14 of its potential returns per unit of risk. Delta Air Lines is currently generating about -0.08 per unit of risk. If you would invest  188,778  in Walmart on September 27, 2024 and sell it today you would lose (5,276) from holding Walmart or give up 2.79% of portfolio value over 90 days.

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

Walmart  vs.  Delta Air Lines

Walmart

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Walmart showed solid returns over the last few months and may actually be approaching a breakup point.

Delta Air Lines

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Delta Air showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Delta Air

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

The idea behind Walmart and Delta Air Lines 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.