Correlation Between Delta Air and Fibra Plus

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

Diversification Opportunities for Delta Air and Fibra Plus

-0.86

Correlation Coefficient

Delta Air  Fibra Plus

Pay attention - limited upside

The 3 months correlation between Delta and Fibra is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Fibra Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fibra Plus 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 Fibra Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fibra Plus has no effect on the direction of Delta Air i.e., Delta Air and Fibra Plus go up and down completely randomly.

Pair Corralation between Delta Air and Fibra Plus

Assuming the 90 days trading horizon Delta Air Lines is expected to under-perform the Fibra Plus. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 2.84 times less risky than Fibra Plus. The stock trades about -0.16 of its potential returns per unit of risk. The Fibra Plus is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  568.00  in Fibra Plus on September 23, 2024 and sell it today you would earn a total of  95.00  from holding Fibra Plus or generate 16.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Delta Air Lines  vs.  Fibra Plus

Delta Air Lines

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 14 (%) 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.

Fibra Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fibra Plus has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fibra Plus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Delta Air and Fibra Plus

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

The idea behind Delta Air Lines and Fibra Plus 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.