Correlation Between Delta Air and ConocoPhillips

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

Diversification Opportunities for Delta Air and ConocoPhillips

0.2

Correlation Coefficient

Delta Air  ConocoPhillips

Modest diversification

The 3 months correlation between Delta and ConocoPhillips is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips 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 ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Delta Air i.e., Delta Air and ConocoPhillips go up and down completely randomly.

Pair Corralation between Delta Air and ConocoPhillips

Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.23 times more return on investment than ConocoPhillips. However, Delta Air is 1.23 times more volatile than ConocoPhillips. It trades about 0.04 of its potential returns per unit of risk. ConocoPhillips is currently generating about -0.05 per unit of risk. If you would invest  35,598  in Delta Air Lines on October 7, 2024 and sell it today you would earn a total of  804.00  from holding Delta Air Lines or generate 2.26% return on investment over 90 days.

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

Delta Air Lines  vs.  ConocoPhillips

Delta Air Lines

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 16 (%) 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.

ConocoPhillips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ConocoPhillips has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ConocoPhillips is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Delta Air and ConocoPhillips

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

The idea behind Delta Air Lines and ConocoPhillips 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.