Correlation Between Bank of America and Delta Air
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and Delta Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Delta Air Lines, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Delta Air.
Diversification Opportunities for Bank of America and Delta Air
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Delta is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America 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 Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and Delta Air go up and down completely randomly.
Pair Corralation between Bank of America and Delta Air
Assuming the 90 days trading horizon Bank of America is expected to generate 6.83 times less return on investment than Delta Air. But when comparing it to its historical volatility, Bank of America is 3.12 times less risky than Delta Air. It trades about 0.11 of its potential returns per unit of risk. Delta Air Lines is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 5,722 in Delta Air Lines on September 1, 2024 and sell it today you would earn a total of 660.00 from holding Delta Air Lines or generate 11.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Delta Air Lines
Performance |
| Timeline |
| Bank of America |
| Delta Air Lines |
Bank of America and Delta Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Delta Air
The main advantage of trading using opposite Bank of America and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. Bank of America | Bank of America vs. Bank of America | Bank of America vs. China Construction Bank | Bank of America vs. Bank of America |
| Delta Air vs. Canadian Pacific Railway | Delta Air vs. Werner Enterprises | Delta Air vs. Canadian National Railway | Delta Air vs. CSX Corporation |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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