Correlation Between Delta Air and A O
Can any of the company-specific risk be diversified away by investing in both Delta Air and A O 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 A O 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 A O Smith, you can compare the effects of market volatilities on Delta Air and A O 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 A O. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and A O.
Diversification Opportunities for Delta Air and A O
Very poor diversification
The 3 months correlation between Delta and AOS is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and A O Smith in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A O Smith 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 A O. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A O Smith has no effect on the direction of Delta Air i.e., Delta Air and A O go up and down completely randomly.
Pair Corralation between Delta Air and A O
Assuming the 90 days trading horizon Delta Air Lines is expected to generate 13.93 times more return on investment than A O. However, Delta Air is 13.93 times more volatile than A O Smith. It trades about 0.1 of its potential returns per unit of risk. A O Smith is currently generating about 0.05 per unit of risk. If you would invest 67,045 in Delta Air Lines on August 31, 2024 and sell it today you would earn a total of 63,455 from holding Delta Air Lines or generate 94.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Delta Air Lines vs. A O Smith
Performance |
| Timeline |
| Delta Air Lines |
| A O Smith |
Delta Air and A O Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and A O
The main advantage of trading using opposite Delta Air and A O positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, A O 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 A O will offset losses from the drop in A O's long position.| Delta Air vs. McEwen Mining | Delta Air vs. CVS Health | Delta Air vs. DXC Technology | Delta Air vs. Martin Marietta Materials |
| A O vs. Taiwan Semiconductor Manufacturing | A O vs. Southern Copper | A O vs. Samsung Electronics Co | A O 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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