Correlation Between NOW and Delta Air

Can any of the company-specific risk be diversified away by investing in both NOW and Delta Air 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 NOW and Delta Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NOW Inc and Delta Air Lines, you can compare the effects of market volatilities on NOW and Delta Air 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 NOW with a short position of Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOW and Delta Air.

Diversification Opportunities for NOW and Delta Air

0.0

Correlation Coefficient

NOW  Delta Air

Pay attention - limited upside

The 3 months correlation between NOW and Delta is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NOW Inc and Delta Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Air Lines and NOW 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 NOW Inc are associated (or correlated) with Delta Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Air Lines has no effect on the direction of NOW i.e., NOW and Delta Air go up and down completely randomly.

Pair Corralation between NOW and Delta Air

If you would invest  83,816  in Delta Air Lines on October 7, 2024 and sell it today you would earn a total of  38,104  from holding Delta Air Lines or generate 45.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

NOW Inc  vs.  Delta Air Lines

NOW Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

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. In spite of fairly weak essential indicators, Delta Air showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NOW and Delta Air

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

The idea behind NOW Inc and Delta Air Lines 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.