Correlation Between Air Transport and Delta Air

Can any of the company-specific risk be diversified away by investing in both Air Transport and Delta Air 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 Air Transport and Delta Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Air Transport Services and Delta Air Lines, you can compare the effects of market volatilities on Air Transport and Delta Air 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 Air Transport with a short position of Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Transport and Delta Air.

Diversification Opportunities for Air Transport and Delta Air

-0.33

Correlation Coefficient

Air Transport  Delta Air

Very good diversification

The 3 months correlation between Air and Delta is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Delta Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Air Lines and Air Transport 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 Air Transport Services are associated (or correlated) with Delta Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Air Lines has no effect on the direction of Air Transport i.e., Air Transport and Delta Air go up and down completely randomly.

Pair Corralation between Air Transport and Delta Air

Given the investment horizon of 90 days Air Transport Services is expected to generate 0.04 times more return on investment than Delta Air. However, Air Transport Services is 23.39 times less risky than Delta Air. It trades about 0.25 of its potential returns per unit of risk. Delta Air Lines is currently generating about -0.12 per unit of risk. If you would invest  2,192  in Air Transport Services on December 27, 2024 and sell it today you would earn a total of  42.00  from holding Air Transport Services or generate 1.92% return on investment over 90 days.

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

Air Transport Services  vs.  Delta Air Lines

Air Transport Services

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Air Transport is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Air Transport and Delta Air

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

The idea behind Air Transport Services and Delta Air Lines 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.