Correlation Between Delta Air and Toyota

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

Diversification Opportunities for Delta Air and Toyota

0.28

Correlation Coefficient

Delta Air  Toyota

Modest diversification

The 3 months correlation between Delta and Toyota is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Toyota Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor 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 Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor Corp has no effect on the direction of Delta Air i.e., Delta Air and Toyota go up and down completely randomly.

Pair Corralation between Delta Air and Toyota

Assuming the 90 days trading horizon Delta Air Lines is expected to under-perform the Toyota. In addition to that, Delta Air is 1.19 times more volatile than Toyota Motor Corp. It trades about -0.17 of its total potential returns per unit of risk. Toyota Motor Corp is currently generating about -0.07 per unit of volatility. If you would invest  308,998  in Toyota Motor Corp on December 30, 2024 and sell it today you would lose (33,198) from holding Toyota Motor Corp or give up 10.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Delta Air Lines  vs.  Toyota Motor 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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Toyota Motor Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toyota Motor Corp 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 Toyota

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

The idea behind Delta Air Lines and Toyota Motor 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.