Correlation Between Delta Air and Capital One

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

Diversification Opportunities for Delta Air and Capital One

0.92

Correlation Coefficient

Delta Air  Capital One

Almost no diversification

The 3 months correlation between Delta and Capital is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Delta Air i.e., Delta Air and Capital One go up and down completely randomly.

Pair Corralation between Delta Air and Capital One

Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.02 times more return on investment than Capital One. However, Delta Air is 1.02 times more volatile than Capital One Financial. It trades about 0.22 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.19 per unit of risk. If you would invest  88,537  in Delta Air Lines on September 14, 2024 and sell it today you would earn a total of  35,663  from holding Delta Air Lines or generate 40.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Delta Air Lines  vs.  Capital One Financial

Delta Air Lines

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Delta Air showed solid returns over the last few months and may actually be approaching a breakup point.

Capital One Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Capital One showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta Air and Capital One

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

The idea behind Delta Air Lines and Capital One Financial 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 Commodity Directory module to find actively traded commodities issued by global exchanges.