Correlation Between Delta Air and Tesla
Can any of the company-specific risk be diversified away by investing in both Delta Air and Tesla 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 Tesla 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 Tesla Inc, you can compare the effects of market volatilities on Delta Air and Tesla 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 Tesla. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Tesla.
Diversification Opportunities for Delta Air and Tesla
Poor diversification
The 3 months correlation between Delta and Tesla is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Tesla Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesla Inc 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 Tesla. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesla Inc has no effect on the direction of Delta Air i.e., Delta Air and Tesla go up and down completely randomly.
Pair Corralation between Delta Air and Tesla
Assuming the 90 days trading horizon Delta Air Lines is expected to under-perform the Tesla. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 1.95 times less risky than Tesla. The stock trades about -0.19 of its potential returns per unit of risk. The Tesla Inc is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 692,906 in Tesla Inc on September 24, 2024 and sell it today you would earn a total of 161,727 from holding Tesla Inc or generate 23.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.0% |
Values | Daily Returns |
Delta Air Lines vs. Tesla Inc
Performance |
Timeline |
Delta Air Lines |
Tesla Inc |
Delta Air and Tesla Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Delta Air and Tesla
The main advantage of trading using opposite Delta Air and Tesla positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Tesla 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 Tesla will offset losses from the drop in Tesla's long position.Delta Air vs. Southern Copper | Delta Air vs. Micron Technology | Delta Air vs. Martin Marietta Materials | Delta Air vs. UnitedHealth Group Incorporated |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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