Correlation Between Delta Air and Lennar
Can any of the company-specific risk be diversified away by investing in both Delta Air and Lennar 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 Lennar 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 Lennar, you can compare the effects of market volatilities on Delta Air and Lennar 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 Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Lennar.
Diversification Opportunities for Delta Air and Lennar
Very good diversification
The 3 months correlation between Delta and Lennar is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar 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 Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Delta Air i.e., Delta Air and Lennar go up and down completely randomly.
Pair Corralation between Delta Air and Lennar
Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.12 times more return on investment than Lennar. However, Delta Air is 1.12 times more volatile than Lennar. It trades about 0.1 of its potential returns per unit of risk. Lennar is currently generating about 0.1 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 Against |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Delta Air Lines vs. Lennar
Performance |
| Timeline |
| Delta Air Lines |
| Lennar |
Delta Air and Lennar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and Lennar
The main advantage of trading using opposite Delta Air and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Lennar 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 Lennar will offset losses from the drop in Lennar's long position.| Delta Air vs. McEwen Mining | Delta Air vs. CVS Health | Delta Air vs. DXC Technology | Delta Air vs. Martin Marietta Materials |
| Lennar vs. FibraHotel | Lennar vs. Delta Air Lines | Lennar vs. Prudential Financial | Lennar vs. McEwen Mining |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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