Correlation Between Delta Air and American Airlines
Can any of the company-specific risk be diversified away by investing in both Delta Air and American Airlines 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 American Airlines 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 American Airlines Group, you can compare the effects of market volatilities on Delta Air and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and American Airlines.
Diversification Opportunities for Delta Air and American Airlines
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Delta and American is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Delta Air i.e., Delta Air and American Airlines go up and down completely randomly.
Pair Corralation between Delta Air and American Airlines
Considering the 90-day investment horizon Delta Air Lines is expected to generate 0.8 times more return on investment than American Airlines. However, Delta Air Lines is 1.25 times less risky than American Airlines. It trades about 0.02 of its potential returns per unit of risk. American Airlines Group is currently generating about -0.01 per unit of risk. If you would invest 4,272 in Delta Air Lines on January 19, 2024 and sell it today you would earn a total of 516.00 from holding Delta Air Lines or generate 12.08% 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. American Airlines Group
Performance |
| Timeline |
| Delta Air Lines |
| American Airlines |
Delta Air and American Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and American Airlines
The main advantage of trading using opposite Delta Air and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.| Delta Air vs. American Airlines Group | Delta Air vs. Southwest Airlines | Delta Air vs. JetBlue Airways Corp | Delta Air vs. Spirit Airlines |
| American Airlines vs. Delta Air Lines | American Airlines vs. Southwest Airlines | American Airlines vs. JetBlue Airways Corp | American Airlines vs. Spirit Airlines |
Check out your portfolio center.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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