Correlation Between Delta Air and Nippon Steel

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

Diversification Opportunities for Delta Air and Nippon Steel

-0.56

Correlation Coefficient

Delta Air  Nippon Steel

Excellent diversification

The 3 months correlation between Delta and Nippon is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Nippon Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Steel Corp 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 Nippon Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Steel Corp has no effect on the direction of Delta Air i.e., Delta Air and Nippon Steel go up and down completely randomly.

Pair Corralation between Delta Air and Nippon Steel

Considering the 90-day investment horizon Delta Air Lines is expected to under-perform the Nippon Steel. In addition to that, Delta Air is 2.08 times more volatile than Nippon Steel Corp. It trades about -0.15 of its total potential returns per unit of risk. Nippon Steel Corp is currently generating about 0.25 per unit of volatility. If you would invest  640.00  in Nippon Steel Corp on December 19, 2024 and sell it today you would earn a total of  139.00  from holding Nippon Steel Corp or generate 21.72% return on investment over 90 days.

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

Delta Air Lines  vs.  Nippon Steel Corp

Delta Air Lines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Air Lines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Nippon Steel Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nippon Steel Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Nippon Steel showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta Air and Nippon Steel

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

The idea behind Delta Air Lines and Nippon Steel Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.