Correlation Between Delta Air and General Motors
Can any of the company-specific risk be diversified away by investing in both Delta Air and General Motors 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 General Motors 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 General Motors Co, you can compare the effects of market volatilities on Delta Air and General Motors 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 General Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and General Motors.
Diversification Opportunities for Delta Air and General Motors
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Delta and General is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and General Motors Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 General Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Delta Air i.e., Delta Air and General Motors go up and down completely randomly.
Pair Corralation between Delta Air and General Motors
Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.01 times more return on investment than General Motors. However, Delta Air is 1.01 times more volatile than General Motors Co. It trades about 0.09 of its potential returns per unit of risk. General Motors Co is currently generating about 0.09 per unit of risk. If you would invest 4,094 in Delta Air Lines on September 14, 2024 and sell it today you would earn a total of 2,140 from holding Delta Air Lines or generate 52.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 98.8% |
| Values | Daily Returns |
Delta Air Lines vs. General Motors Co
Performance |
| Timeline |
| Delta Air Lines |
| General Motors |
Delta Air and General Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and General Motors
The main advantage of trading using opposite Delta Air and General Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, General Motors 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 General Motors will offset losses from the drop in General Motors' long position.| Delta Air vs. Silvercorp Metals | Delta Air vs. METALL ZUG AG | Delta Air vs. Anglesey Mining | Delta Air vs. Blackrock World Mining |
| General Motors vs. Ryanair Holdings plc | General Motors vs. Delta Air Lines | General Motors vs. United Utilities Group | General Motors vs. Jacquet Metal Service |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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