Correlation Between Delta Air and Fannie Mae

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

Diversification Opportunities for Delta Air and Fannie Mae

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Delta and Fannie is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Fannie Mae in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fannie Mae 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 Fannie Mae. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fannie Mae has no effect on the direction of Delta Air i.e., Delta Air and Fannie Mae go up and down completely randomly.

Pair Corralation between Delta Air and Fannie Mae

Assuming the 90 days trading horizon Delta Air Lines is expected to under-perform the Fannie Mae. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 8.32 times less risky than Fannie Mae. The stock trades about -0.35 of its potential returns per unit of risk. The Fannie Mae is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  283.00  in Fannie Mae on October 8, 2024 and sell it today you would earn a total of  136.00  from holding Fannie Mae or generate 48.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy89.47%
ValuesDaily Returns

Delta Air Lines  vs.  Fannie Mae

 Performance 
       Timeline  
Delta Air Lines 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Delta Air unveiled solid returns over the last few months and may actually be approaching a breakup point.
Fannie Mae 

Risk-Adjusted Performance

21 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Fannie Mae are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fannie Mae unveiled solid returns over the last few months and may actually be approaching a breakup point.

Delta Air and Fannie Mae Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Delta Air and Fannie Mae

The main advantage of trading using opposite Delta Air and Fannie Mae positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Fannie Mae 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 Fannie Mae will offset losses from the drop in Fannie Mae's long position.
The idea behind Delta Air Lines and Fannie Mae 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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