Correlation Between Delta Air and United Parcel
Can any of the company-specific risk be diversified away by investing in both Delta Air and United Parcel 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 United Parcel 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 United Parcel Service, you can compare the effects of market volatilities on Delta Air and United Parcel 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 United Parcel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and United Parcel.
Diversification Opportunities for Delta Air and United Parcel
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Delta and United is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and United Parcel Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Parcel Service 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 United Parcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Parcel Service has no effect on the direction of Delta Air i.e., Delta Air and United Parcel go up and down completely randomly.
Pair Corralation between Delta Air and United Parcel
Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.2 times more return on investment than United Parcel. However, Delta Air is 1.2 times more volatile than United Parcel Service. It trades about 0.08 of its potential returns per unit of risk. United Parcel Service is currently generating about -0.01 per unit of risk. If you would invest 61,827 in Delta Air Lines on September 14, 2024 and sell it today you would earn a total of 65,550 from holding Delta Air Lines or generate 106.02% 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. United Parcel Service
Performance |
| Timeline |
| Delta Air Lines |
| United Parcel Service |
Delta Air and United Parcel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and United Parcel
The main advantage of trading using opposite Delta Air and United Parcel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, United Parcel 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 United Parcel will offset losses from the drop in United Parcel's long position.| Delta Air vs. Southwest Airlines | Delta Air vs. United Airlines Holdings | Delta Air vs. Controladora Vuela Compaa |
| United Parcel vs. Ameriprise Financial | United Parcel vs. Southern Copper | United Parcel vs. Lloyds Banking Group | United Parcel vs. Martin Marietta Materials |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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