Correlation Between Delta Air and Dell Technologies

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

Diversification Opportunities for Delta Air and Dell Technologies

0.68

Correlation Coefficient

Delta Air  Dell Technologies

Poor diversification

The 3 months correlation between Delta and Dell is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Dell Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dell Technologies 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 Dell Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dell Technologies has no effect on the direction of Delta Air i.e., Delta Air and Dell Technologies go up and down completely randomly.

Pair Corralation between Delta Air and Dell Technologies

Assuming the 90 days trading horizon Delta Air Lines is expected to under-perform the Dell Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 1.2 times less risky than Dell Technologies. The stock trades about -0.17 of its potential returns per unit of risk. The Dell Technologies is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  70,587  in Dell Technologies on December 30, 2024 and sell it today you would lose (17,479) from holding Dell Technologies or give up 24.76% of portfolio value over 90 days.

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

Delta Air Lines  vs.  Dell Technologies

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 uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Dell Technologies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dell Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Delta Air and Dell Technologies

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

The idea behind Delta Air Lines and Dell Technologies 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 Transaction History module to view history of all your transactions and understand their impact on performance.