Correlation Between Delta Air and NiSource

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

Diversification Opportunities for Delta Air and NiSource

0.87

Correlation Coefficient

Delta Air  NiSource

Very poor diversification

The 3 months correlation between Delta and NiSource is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource 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 NiSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NiSource has no effect on the direction of Delta Air i.e., Delta Air and NiSource go up and down completely randomly.

Pair Corralation between Delta Air and NiSource

Assuming the 90 days horizon Delta Air Lines is expected to generate 1.87 times more return on investment than NiSource. However, Delta Air is 1.87 times more volatile than NiSource. It trades about 0.24 of its potential returns per unit of risk. NiSource is currently generating about 0.11 per unit of risk. If you would invest  5,896  in Delta Air Lines on October 25, 2024 and sell it today you would earn a total of  720.00  from holding Delta Air Lines or generate 12.21% return on investment over 90 days.

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

Delta Air Lines  vs.  NiSource

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. Despite nearly fragile basic indicators, Delta Air reported solid returns over the last few months and may actually be approaching a breakup point.

NiSource

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, NiSource reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delta Air and NiSource

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

The idea behind Delta Air Lines and NiSource 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.