Correlation Between Delta Air and FORWARD AIR

Can any of the company-specific risk be diversified away by investing in both Delta Air and FORWARD 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 Delta Air and FORWARD AIR 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 FORWARD AIR P, you can compare the effects of market volatilities on Delta Air and FORWARD 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 Delta Air with a short position of FORWARD AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and FORWARD AIR.

Diversification Opportunities for Delta Air and FORWARD AIR

-0.09

Correlation Coefficient

Delta Air  FORWARD AIR

Good diversification

The 3 months correlation between Delta and FORWARD is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and FORWARD AIR P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FORWARD AIR P 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 FORWARD AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FORWARD AIR P has no effect on the direction of Delta Air i.e., Delta Air and FORWARD AIR go up and down completely randomly.

Pair Corralation between Delta Air and FORWARD AIR

Assuming the 90 days horizon Delta Air Lines is expected to under-perform the FORWARD AIR. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 3.41 times less risky than FORWARD AIR. The stock trades about -0.22 of its potential returns per unit of risk. The FORWARD AIR P is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,180  in FORWARD AIR P on October 10, 2024 and sell it today you would lose (120.00) from holding FORWARD AIR P or give up 3.77% of portfolio value over 90 days.

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

Delta Air Lines  vs.  FORWARD AIR P

Delta Air Lines

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Delta Air reported solid returns over the last few months and may actually be approaching a breakup point.

FORWARD AIR P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FORWARD AIR P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, FORWARD AIR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Delta Air and FORWARD AIR

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

The idea behind Delta Air Lines and FORWARD AIR P 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.