Correlation Between Delta Air and Future Metals

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

Diversification Opportunities for Delta Air and Future Metals

0.14

Correlation Coefficient

Delta Air  Future Metals

Average diversification

The 3 months correlation between Delta and Future is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Future Metals NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Metals NL 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 Future Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Metals NL has no effect on the direction of Delta Air i.e., Delta Air and Future Metals go up and down completely randomly.

Pair Corralation between Delta Air and Future Metals

Assuming the 90 days trading horizon Delta Air Lines is expected to generate 0.71 times more return on investment than Future Metals. However, Delta Air Lines is 1.41 times less risky than Future Metals. It trades about -0.07 of its potential returns per unit of risk. Future Metals NL is currently generating about -0.31 per unit of risk. If you would invest  6,363  in Delta Air Lines on September 17, 2024 and sell it today you would lose (224.00) from holding Delta Air Lines or give up 3.52% of portfolio value over 90 days.

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

Delta Air Lines  vs.  Future Metals NL

Delta Air Lines

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 15 (%) 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.

Future Metals NL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Future Metals NL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Delta Air and Future Metals

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

The idea behind Delta Air Lines and Future Metals NL 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.