Correlation Between Delta Air and Bank of Ireland

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

Diversification Opportunities for Delta Air and Bank of Ireland

-0.71

Correlation Coefficient

Delta Air  Bank of Ireland

Pay attention - limited upside

The 3 months correlation between Delta and Bank is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Bank of Ireland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Ireland 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 Bank of Ireland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Ireland has no effect on the direction of Delta Air i.e., Delta Air and Bank of Ireland go up and down completely randomly.

Pair Corralation between Delta Air and Bank of Ireland

Assuming the 90 days trading horizon Delta Air Lines is expected to under-perform the Bank of Ireland. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 1.61 times less risky than Bank of Ireland. The stock trades about -0.16 of its potential returns per unit of risk. The Bank of Ireland is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  849.00  in Bank of Ireland on October 9, 2024 and sell it today you would earn a total of  38.00  from holding Bank of Ireland or generate 4.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Delta Air Lines  vs.  Bank of Ireland

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.

Bank of Ireland

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Delta Air and Bank of Ireland

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

The idea behind Delta Air Lines and Bank of Ireland 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 CEOs Directory module to screen CEOs from public companies around the world.