Correlation Between Delta Air and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Delta Air and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Delta Air and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Dow Jones.
Diversification Opportunities for Delta Air and Dow Jones
Very poor diversification
The 3 months correlation between Delta and Dow is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Delta Air i.e., Delta Air and Dow Jones go up and down completely randomly.
Pair Corralation between Delta Air and Dow Jones
Assuming the 90 days trading horizon Delta Air Lines is expected to generate 2.7 times more return on investment than Dow Jones. However, Delta Air is 2.7 times more volatile than Dow Jones Industrial. It trades about 0.3 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of risk. If you would invest 112,060 in Delta Air Lines on August 28, 2024 and sell it today you would earn a total of 18,872 from holding Delta Air Lines or generate 16.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Delta Air Lines vs. Dow Jones Industrial
Performance |
| Timeline |
Delta Air and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Delta Air Lines
Pair trading matchups for Delta Air
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Delta Air and Dow Jones
The main advantage of trading using opposite Delta Air and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Delta Air vs. FIBRA Storage | Delta Air vs. McEwen Mining | Delta Air vs. First Majestic Silver | Delta Air vs. Deutsche Bank Aktiengesellschaft |
| Dow Jones vs. CECO Environmental Corp | Dow Jones vs. Western Acquisition Ventures | Dow Jones vs. Tyson Foods | Dow Jones vs. Inflection Point Acquisition |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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