Correlation Between Coca Cola and Delta Air

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

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

Diversification Opportunities for Coca Cola and Delta Air

-0.59

Correlation Coefficient

Coca Cola  Delta Air

Excellent diversification

The 3 months correlation between Coca and Delta is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola FEMSA SAB 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 Coca Cola 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 Coca Cola FEMSA SAB 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 Coca Cola i.e., Coca Cola and Delta Air go up and down completely randomly.

Pair Corralation between Coca Cola and Delta Air

Assuming the 90 days trading horizon Coca Cola FEMSA SAB is expected to generate 0.57 times more return on investment than Delta Air. However, Coca Cola FEMSA SAB is 1.76 times less risky than Delta Air. It trades about 0.14 of its potential returns per unit of risk. Delta Air Lines is currently generating about -0.13 per unit of risk. If you would invest  15,974  in Coca Cola FEMSA SAB on December 27, 2024 and sell it today you would earn a total of  2,341  from holding Coca Cola FEMSA SAB or generate 14.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Coca Cola FEMSA SAB  vs.  Delta Air Lines

Coca Cola FEMSA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola FEMSA SAB are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Coca Cola sustained solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly 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 Coca Cola and Delta Air

The main advantage of trading using opposite Coca Cola and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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 Coca Cola FEMSA SAB 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.