Correlation Between Target and Delta Air
Can any of the company-specific risk be diversified away by investing in both Target 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 Target and Delta Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target and Delta Air Lines, you can compare the effects of market volatilities on Target 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 Target with a short position of Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target and Delta Air.
Diversification Opportunities for Target and Delta Air
Weak diversification
The 3 months correlation between Target and Delta is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Target 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 Target 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 Target 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 Target i.e., Target and Delta Air go up and down completely randomly.
Pair Corralation between Target and Delta Air
Assuming the 90 days trading horizon Target is expected to under-perform the Delta Air. But the stock apears to be less risky and, when comparing its historical volatility, Target is 1.31 times less risky than Delta Air. The stock trades about -0.04 of its potential returns per unit of risk. The Delta Air Lines is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 127,791 in Delta Air Lines on December 4, 2024 and sell it today you would lose (691.00) from holding Delta Air Lines or give up 0.54% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.36% |
Values | Daily Returns |
Target vs. Delta Air Lines
Performance |
Timeline |
Target |
Delta Air Lines |
Target and Delta Air Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Target and Delta Air
The main advantage of trading using opposite Target and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target 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.Target vs. Grupo Sports World | Target vs. Verizon Communications | Target vs. Burlington Stores | Target vs. Cognizant Technology Solutions |
Delta Air vs. Steel Dynamics | Delta Air vs. UnitedHealth Group Incorporated | Delta Air vs. Cognizant Technology Solutions | Delta Air vs. Grupo Sports World |
Check out your portfolio center.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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