Correlation Between Tata Steel and Delta Air

Can any of the company-specific risk be diversified away by investing in both Tata Steel 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 Tata Steel and Delta Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Tata Steel Limited and Delta Air Lines, you can compare the effects of market volatilities on Tata Steel 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 Tata Steel with a short position of Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tata Steel and Delta Air.

Diversification Opportunities for Tata Steel and Delta Air

-0.78

Correlation Coefficient

Tata Steel  Delta Air

Pay attention - limited upside

The 3 months correlation between Tata and Delta is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Tata Steel Limited 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 Tata Steel 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 Tata Steel Limited 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 Tata Steel i.e., Tata Steel and Delta Air go up and down completely randomly.

Pair Corralation between Tata Steel and Delta Air

Assuming the 90 days trading horizon Tata Steel Limited is expected to under-perform the Delta Air. In addition to that, Tata Steel is 1.06 times more volatile than Delta Air Lines. It trades about -0.05 of its total potential returns per unit of risk. Delta Air Lines is currently generating about 0.08 per unit of volatility. If you would invest  4,642  in Delta Air Lines on October 9, 2024 and sell it today you would earn a total of  1,499  from holding Delta Air Lines or generate 32.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.47%
Values	Daily Returns

Tata Steel Limited  vs.  Delta Air Lines

Tata Steel Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tata Steel Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Delta Air Lines

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Delta Air unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tata Steel and Delta Air

The main advantage of trading using opposite Tata Steel and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tata Steel 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.

The idea behind Tata Steel Limited and Delta Air Lines 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.