Correlation Between Delta Air and PureTech Health

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

Diversification Opportunities for Delta Air and PureTech Health

0.72

Correlation Coefficient

Delta Air  PureTech Health

Poor diversification

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

Pair Corralation between Delta Air and PureTech Health

Assuming the 90 days trading horizon Delta Air Lines is expected to under-perform the PureTech Health. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 1.45 times less risky than PureTech Health. The stock trades about -0.09 of its potential returns per unit of risk. The PureTech Health plc is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  15,780  in PureTech Health plc on October 7, 2024 and sell it today you would lose (660.00) from holding PureTech Health plc or give up 4.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.62%
Values	Daily Returns

Delta Air Lines  vs.  PureTech Health plc

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.

PureTech Health plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Delta Air and PureTech Health

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

The idea behind Delta Air Lines and PureTech Health plc 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.