Correlation Between Delta Air and AMERICAN

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

Diversification Opportunities for Delta Air and AMERICAN

-0.34

Correlation Coefficient

Delta Air  AMERICAN

Very good diversification

The 3 months correlation between Delta and AMERICAN is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and AMERICAN INTL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMERICAN INTL GROUP 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 AMERICAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMERICAN INTL GROUP has no effect on the direction of Delta Air i.e., Delta Air and AMERICAN go up and down completely randomly.

Pair Corralation between Delta Air and AMERICAN

Considering the 90-day investment horizon Delta Air Lines is expected to generate 3.18 times more return on investment than AMERICAN. However, Delta Air is 3.18 times more volatile than AMERICAN INTL GROUP. It trades about -0.1 of its potential returns per unit of risk. AMERICAN INTL GROUP is currently generating about -0.68 per unit of risk. If you would invest  6,348  in Delta Air Lines on October 12, 2024 and sell it today you would lose (206.00) from holding Delta Air Lines or give up 3.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	35.0%
Values	Daily Returns

Delta Air Lines  vs.  AMERICAN INTL GROUP

Delta Air Lines

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 9 (%) 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.

AMERICAN INTL GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AMERICAN INTL GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for AMERICAN INTL GROUP investors.

Pair Trading with Delta Air and AMERICAN

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

The idea behind Delta Air Lines and AMERICAN INTL GROUP 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.