Correlation Between Sparebank and Delta Air
Can any of the company-specific risk be diversified away by investing in both Sparebank 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 Sparebank and Delta Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparebank 1 SR and Delta Air Lines, you can compare the effects of market volatilities on Sparebank 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 Sparebank with a short position of Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Delta Air.
Diversification Opportunities for Sparebank and Delta Air
Very poor diversification
The 3 months correlation between Sparebank and Delta is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR 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 Sparebank 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 Sparebank 1 SR 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 Sparebank i.e., Sparebank and Delta Air go up and down completely randomly.
Pair Corralation between Sparebank and Delta Air
Assuming the 90 days trading horizon Sparebank is expected to generate 2.95 times less return on investment than Delta Air. But when comparing it to its historical volatility, Sparebank 1 SR is 1.92 times less risky than Delta Air. It trades about 0.09 of its potential returns per unit of risk. Delta Air Lines is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 3,217 in Delta Air Lines on September 1, 2024 and sell it today you would earn a total of 3,158 from holding Delta Air Lines or generate 98.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
Sparebank 1 SR vs. Delta Air Lines
Performance |
| Timeline |
| Sparebank 1 SR |
| Delta Air Lines |
Sparebank and Delta Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparebank and Delta Air
The main advantage of trading using opposite Sparebank and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparebank 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.| Sparebank vs. Hollywood Bowl Group | Sparebank vs. XLMedia PLC | Sparebank vs. Catalyst Media Group | Sparebank vs. Atresmedia |
| Delta Air vs. Induction Healthcare Group | Delta Air vs. CVS Health Corp | Delta Air vs. Federal Realty Investment | Delta Air vs. Optima Health plc |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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