Correlation Between DELTA AIR and IMPERIAL TOBACCO

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

Diversification Opportunities for DELTA AIR and IMPERIAL TOBACCO

0.86

Correlation Coefficient

DELTA AIR  IMPERIAL TOBACCO

Very poor diversification

The 3 months correlation between DELTA and IMPERIAL is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding DELTA AIR LINES and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of DELTA AIR i.e., DELTA AIR and IMPERIAL TOBACCO go up and down completely randomly.

Pair Corralation between DELTA AIR and IMPERIAL TOBACCO

Assuming the 90 days trading horizon DELTA AIR LINES is expected to generate 1.79 times more return on investment than IMPERIAL TOBACCO. However, DELTA AIR is 1.79 times more volatile than IMPERIAL TOBACCO . It trades about 0.06 of its potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.08 per unit of risk. If you would invest  3,457  in DELTA AIR LINES on October 4, 2024 and sell it today you would earn a total of  2,393  from holding DELTA AIR LINES or generate 69.22% 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.  IMPERIAL TOBACCO

DELTA AIR LINES

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DELTA AIR LINES are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, DELTA AIR unveiled solid returns over the last few months and may actually be approaching a breakup point.

IMPERIAL TOBACCO

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IMPERIAL TOBACCO are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, IMPERIAL TOBACCO unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DELTA AIR and IMPERIAL TOBACCO

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

The idea behind DELTA AIR LINES and IMPERIAL TOBACCO 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..