Correlation Between Delta Air and Sumitomo Mitsui

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

Diversification Opportunities for Delta Air and Sumitomo Mitsui

0.07

Correlation Coefficient

Delta Air  Sumitomo Mitsui

Significant diversification

The 3 months correlation between Delta and Sumitomo is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Sumitomo Mitsui Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Financial 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 Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Financial has no effect on the direction of Delta Air i.e., Delta Air and Sumitomo Mitsui go up and down completely randomly.

Pair Corralation between Delta Air and Sumitomo Mitsui

Assuming the 90 days trading horizon Delta Air Lines is expected to under-perform the Sumitomo Mitsui. In addition to that, Delta Air is 1.41 times more volatile than Sumitomo Mitsui Financial. It trades about -0.05 of its total potential returns per unit of risk. Sumitomo Mitsui Financial is currently generating about 0.0 per unit of volatility. If you would invest  9,081  in Sumitomo Mitsui Financial on December 4, 2024 and sell it today you would lose (79.00) from holding Sumitomo Mitsui Financial or give up 0.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

Delta Air Lines  vs.  Sumitomo Mitsui Financial

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sumitomo Mitsui Financial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Delta Air and Sumitomo Mitsui

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

The idea behind Delta Air Lines and Sumitomo Mitsui Financial 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.

Check out your portfolio center.

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 Anywhere module to track or share privately all of your investments from the convenience of any device.