Correlation Between Delta Air and Booking Holdings

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

Diversification Opportunities for Delta Air and Booking Holdings

0.51

Correlation Coefficient

Delta Air  Booking Holdings

Very weak diversification

The 3 months correlation between Delta and Booking is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Booking Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Booking Holdings 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 Booking Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Booking Holdings has no effect on the direction of Delta Air i.e., Delta Air and Booking Holdings go up and down completely randomly.

Pair Corralation between Delta Air and Booking Holdings

Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.29 times more return on investment than Booking Holdings. However, Delta Air is 1.29 times more volatile than Booking Holdings. It trades about -0.16 of its potential returns per unit of risk. Booking Holdings is currently generating about -0.25 per unit of risk. If you would invest  6,307  in Delta Air Lines on October 9, 2024 and sell it today you would lose (278.00) from holding Delta Air Lines or give up 4.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Delta Air Lines  vs.  Booking Holdings

Delta Air Lines

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 10 (%) 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.

Booking Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Booking Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Booking Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta Air and Booking Holdings

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

The idea behind Delta Air Lines and Booking Holdings 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.