Correlation Between Future Metals and Delta Air

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

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

Diversification Opportunities for Future Metals and Delta Air

0.14

Correlation Coefficient

Future Metals  Delta Air

Average diversification

The 3 months correlation between Future and Delta is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Future Metals NL 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 Future Metals 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 Future Metals NL 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 Future Metals i.e., Future Metals and Delta Air go up and down completely randomly.

Pair Corralation between Future Metals and Delta Air

Assuming the 90 days trading horizon Future Metals NL is expected to under-perform the Delta Air. In addition to that, Future Metals is 1.36 times more volatile than Delta Air Lines. It trades about -0.05 of its total potential returns per unit of risk. Delta Air Lines is currently generating about 0.19 per unit of volatility. If you would invest  4,637  in Delta Air Lines on September 17, 2024 and sell it today you would earn a total of  1,502  from holding Delta Air Lines or generate 32.39% return on investment over 90 days.

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

Future Metals NL  vs.  Delta Air Lines

Future Metals NL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Future Metals NL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Delta Air Lines

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Delta Air unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Future Metals and Delta Air

The main advantage of trading using opposite Future Metals and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Future Metals 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 Future Metals NL 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.