Correlation Between Northern Minerals and Delta Air

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

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

Diversification Opportunities for Northern Minerals and Delta Air

-0.24

Correlation Coefficient

Northern Minerals  Delta Air

Very good diversification

The 3 months correlation between Northern and Delta is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Northern Minerals Limited 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 Northern Minerals 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 Northern Minerals Limited 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 Northern Minerals i.e., Northern Minerals and Delta Air go up and down completely randomly.

Pair Corralation between Northern Minerals and Delta Air

Assuming the 90 days horizon Northern Minerals Limited is expected to generate 5.24 times more return on investment than Delta Air. However, Northern Minerals is 5.24 times more volatile than Delta Air Lines. It trades about 0.03 of its potential returns per unit of risk. Delta Air Lines is currently generating about 0.12 per unit of risk. If you would invest  2.50  in Northern Minerals Limited on October 27, 2024 and sell it today you would lose (1.60) from holding Northern Minerals Limited or give up 64.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.68%
Values	Daily Returns

Northern Minerals Limited  vs.  Delta Air Lines

Northern Minerals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Northern Minerals Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Northern Minerals reported solid returns over the last few months and may actually be approaching a breakup point.

Delta Air Lines

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Delta Air reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Northern Minerals and Delta Air

The main advantage of trading using opposite Northern Minerals and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northern Minerals 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 Northern Minerals Limited 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.