Correlation Between Delta Air and Sparta Capital

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

Diversification Opportunities for Delta Air and Sparta Capital

0.54

Correlation Coefficient

Delta Air  Sparta Capital

Very weak diversification

The 3 months correlation between Delta and Sparta is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital 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 Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Delta Air i.e., Delta Air and Sparta Capital go up and down completely randomly.

Pair Corralation between Delta Air and Sparta Capital

Considering the 90-day investment horizon Delta Air Lines is expected to under-perform the Sparta Capital. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 6.44 times less risky than Sparta Capital. The stock trades about -0.12 of its potential returns per unit of risk. The Sparta Capital is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Sparta Capital on December 27, 2024 and sell it today you would lose (1.39) from holding Sparta Capital or give up 92.67% of portfolio value over 90 days.

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

Delta Air Lines  vs.  Sparta Capital

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.

Sparta Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Delta Air and Sparta Capital

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

The idea behind Delta Air Lines and Sparta Capital 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.