Correlation Between Delta Air and Forward Pharma

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

Diversification Opportunities for Delta Air and Forward Pharma

-0.43

Correlation Coefficient

Delta Air  Forward Pharma

Very good diversification

The 3 months correlation between Delta and Forward is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Forward Pharma AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Pharma AS 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 Forward Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forward Pharma AS has no effect on the direction of Delta Air i.e., Delta Air and Forward Pharma go up and down completely randomly.

Pair Corralation between Delta Air and Forward Pharma

Considering the 90-day investment horizon Delta Air is expected to generate 2.78 times less return on investment than Forward Pharma. But when comparing it to its historical volatility, Delta Air Lines is 1.92 times less risky than Forward Pharma. It trades about 0.06 of its potential returns per unit of risk. Forward Pharma AS is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  291.00  in Forward Pharma AS on October 11, 2024 and sell it today you would earn a total of  9.00  from holding Forward Pharma AS or generate 3.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	2.42%
Values	Daily Returns

Delta Air Lines  vs.  Forward Pharma AS

Delta Air Lines

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 11 (%) 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.

Forward Pharma AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Forward Pharma AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Forward Pharma is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Delta Air and Forward Pharma

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

The idea behind Delta Air Lines and Forward Pharma AS 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.