Correlation Between Delta Air and Liberty Media

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

Diversification Opportunities for Delta Air and Liberty Media

0.21

Correlation Coefficient

Delta Air  Liberty Media

Modest diversification

The 3 months correlation between Delta and Liberty is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Liberty Media Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media Corp 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 Liberty Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media Corp has no effect on the direction of Delta Air i.e., Delta Air and Liberty Media go up and down completely randomly.

Pair Corralation between Delta Air and Liberty Media

Assuming the 90 days trading horizon Delta Air Lines is expected to under-perform the Liberty Media. In addition to that, Delta Air is 1.4 times more volatile than Liberty Media Corp. It trades about -0.03 of its total potential returns per unit of risk. Liberty Media Corp is currently generating about 0.09 per unit of volatility. If you would invest  8,096  in Liberty Media Corp on December 2, 2024 and sell it today you would earn a total of  709.00  from holding Liberty Media Corp or generate 8.76% return on investment over 90 days.

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

Delta Air Lines  vs.  Liberty Media Corp

Delta Air Lines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Air Lines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Delta Air is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Liberty Media Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Liberty Media may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Delta Air and Liberty Media

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

The idea behind Delta Air Lines and Liberty Media Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.