Correlation Between Delta Air and ASML Holding

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

Diversification Opportunities for Delta Air and ASML Holding

0.09

Correlation Coefficient

Delta Air  ASML Holding

Significant diversification

The 3 months correlation between Delta and ASML is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and ASML Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASML Holding NV 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 ASML Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASML Holding NV has no effect on the direction of Delta Air i.e., Delta Air and ASML Holding go up and down completely randomly.

Pair Corralation between Delta Air and ASML Holding

Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.11 times more return on investment than ASML Holding. However, Delta Air is 1.11 times more volatile than ASML Holding NV. It trades about 0.19 of its potential returns per unit of risk. ASML Holding NV is currently generating about 0.12 per unit of risk. If you would invest  30,798  in Delta Air Lines on October 25, 2024 and sell it today you would earn a total of  9,603  from holding Delta Air Lines or generate 31.18% return on investment over 90 days.

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

Delta Air Lines  vs.  ASML Holding NV

Delta Air Lines

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Delta Air sustained solid returns over the last few months and may actually be approaching a breakup point.

ASML Holding NV

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ASML Holding NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, ASML Holding sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta Air and ASML Holding

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

The idea behind Delta Air Lines and ASML Holding NV 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.