Correlation Between Delta Air and MOWI ASA

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

Diversification Opportunities for Delta Air and MOWI ASA

0.55

Correlation Coefficient

Delta Air  MOWI ASA

Very weak diversification

The 3 months correlation between Delta and MOWI is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and MOWI ASA SPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOWI ASA SPADR 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 MOWI ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOWI ASA SPADR has no effect on the direction of Delta Air i.e., Delta Air and MOWI ASA go up and down completely randomly.

Pair Corralation between Delta Air and MOWI ASA

Assuming the 90 days horizon Delta Air Lines is expected to under-perform the MOWI ASA. In addition to that, Delta Air is 1.58 times more volatile than MOWI ASA SPADR. It trades about -0.02 of its total potential returns per unit of risk. MOWI ASA SPADR is currently generating about 0.13 per unit of volatility. If you would invest  1,567  in MOWI ASA SPADR on October 7, 2024 and sell it today you would earn a total of  93.00  from holding MOWI ASA SPADR or generate 5.93% return on investment over 90 days.

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

Delta Air Lines  vs.  MOWI ASA SPADR

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

MOWI ASA SPADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MOWI ASA SPADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, MOWI ASA 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 MOWI ASA

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

The idea behind Delta Air Lines and MOWI ASA SPADR 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.