Correlation Between Delta Air and Nokia
Can any of the company-specific risk be diversified away by investing in both Delta Air and Nokia 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 Nokia 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 Nokia, you can compare the effects of market volatilities on Delta Air and Nokia 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 Nokia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Nokia.
Diversification Opportunities for Delta Air and Nokia
Poor diversification
The 3 months correlation between Delta and Nokia is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Nokia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nokia 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 Nokia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nokia has no effect on the direction of Delta Air i.e., Delta Air and Nokia go up and down completely randomly.
Pair Corralation between Delta Air and Nokia
Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.07 times more return on investment than Nokia. However, Delta Air is 1.07 times more volatile than Nokia. It trades about 0.24 of its potential returns per unit of risk. Nokia is currently generating about 0.01 per unit of risk. If you would invest 99,504 in Delta Air Lines on August 30, 2024 and sell it today you would earn a total of 30,996 from holding Delta Air Lines or generate 31.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Delta Air Lines vs. Nokia
Performance |
| Timeline |
| Delta Air Lines |
| Nokia |
Delta Air and Nokia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and Nokia
The main advantage of trading using opposite Delta Air and Nokia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Nokia 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 Nokia will offset losses from the drop in Nokia's long position.| Delta Air vs. Southern Copper | Delta Air vs. McEwen Mining | Delta Air vs. Ameriprise Financial | Delta Air vs. Grupo Carso SAB |
| Nokia vs. McEwen Mining | Nokia vs. Taiwan Semiconductor Manufacturing | Nokia vs. Verizon Communications | Nokia vs. Costco Wholesale |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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