Correlation Between Delta Air and Vista Oil
Can any of the company-specific risk be diversified away by investing in both Delta Air and Vista Oil 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 Vista Oil 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 Vista Oil Gas, you can compare the effects of market volatilities on Delta Air and Vista Oil 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 Vista Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Vista Oil.
Diversification Opportunities for Delta Air and Vista Oil
Poor diversification
The 3 months correlation between Delta and Vista is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Vista Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vista Oil Gas 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 Vista Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vista Oil Gas has no effect on the direction of Delta Air i.e., Delta Air and Vista Oil go up and down completely randomly.
Pair Corralation between Delta Air and Vista Oil
Assuming the 90 days trading horizon Delta Air Lines is expected to under-perform the Vista Oil. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 1.23 times less risky than Vista Oil. The stock trades about -0.08 of its potential returns per unit of risk. The Vista Oil Gas is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 109,230 in Vista Oil Gas on September 27, 2024 and sell it today you would lose (1,430) from holding Vista Oil Gas or give up 1.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Delta Air Lines vs. Vista Oil Gas
Performance |
| Timeline |
| Delta Air Lines |
| Vista Oil Gas |
Delta Air and Vista Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and Vista Oil
The main advantage of trading using opposite Delta Air and Vista Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Vista Oil 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 Vista Oil will offset losses from the drop in Vista Oil's long position.| Delta Air vs. Southwest Airlines | Delta Air vs. United Airlines Holdings | Delta Air vs. Controladora Vuela Compaa | Delta Air vs. Grupo Aeromxico SAB |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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