Correlation Between Delta Air and ANA Holdings

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

Diversification Opportunities for Delta Air and ANA Holdings

-0.66

Correlation Coefficient

Delta Air  ANA Holdings

Excellent diversification

The 3 months correlation between Delta and ANA is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and ANA Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ANA Holdings ADR 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 ANA Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ANA Holdings ADR has no effect on the direction of Delta Air i.e., Delta Air and ANA Holdings go up and down completely randomly.

Pair Corralation between Delta Air and ANA Holdings

Considering the 90-day investment horizon Delta Air Lines is expected to generate 0.84 times more return on investment than ANA Holdings. However, Delta Air Lines is 1.19 times less risky than ANA Holdings. It trades about 0.31 of its potential returns per unit of risk. ANA Holdings ADR is currently generating about -0.03 per unit of risk. If you would invest  4,225  in Delta Air Lines on September 2, 2024 and sell it today you would earn a total of  2,157  from holding Delta Air Lines or generate 51.05% return on investment over 90 days.

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

Delta Air Lines  vs.  ANA Holdings ADR

Delta Air Lines

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 24 (%) 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.

ANA Holdings ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ANA Holdings ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ANA Holdings 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 ANA Holdings

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

The idea behind Delta Air Lines and ANA Holdings ADR 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.