Correlation Between Black Hills and Delta Air

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

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

Diversification Opportunities for Black Hills and Delta Air

0.54

Correlation Coefficient

Black Hills  Delta Air

Very weak diversification

The 3 months correlation between Black and Delta is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Black Hills 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 Black Hills 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 Black Hills 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 Black Hills i.e., Black Hills and Delta Air go up and down completely randomly.

Pair Corralation between Black Hills and Delta Air

Considering the 90-day investment horizon Black Hills is expected to under-perform the Delta Air. But the stock apears to be less risky and, when comparing its historical volatility, Black Hills is 1.49 times less risky than Delta Air. The stock trades about -0.31 of its potential returns per unit of risk. The Delta Air Lines is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  6,226  in Delta Air Lines on October 8, 2024 and sell it today you would lose (326.00) from holding Delta Air Lines or give up 5.24% of portfolio value over 90 days.

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

Black Hills  vs.  Delta Air Lines

Black Hills

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Hills has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward-looking signals, Black Hills is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Delta Air Lines

Risk-Adjusted Performance

10 of 100

Good

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. Despite quite conflicting basic indicators, Delta Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Black Hills and Delta Air

The main advantage of trading using opposite Black Hills and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Hills 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 Black Hills 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.