Correlation Between Delta Air and Pearson PLC
Can any of the company-specific risk be diversified away by investing in both Delta Air and Pearson PLC 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 Pearson PLC 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 Pearson PLC ADR, you can compare the effects of market volatilities on Delta Air and Pearson PLC 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 Pearson PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Pearson PLC.
Diversification Opportunities for Delta Air and Pearson PLC
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Delta and Pearson is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Pearson PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson PLC ADR 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 Pearson PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearson PLC ADR has no effect on the direction of Delta Air i.e., Delta Air and Pearson PLC go up and down completely randomly.
Pair Corralation between Delta Air and Pearson PLC
Considering the 90-day investment horizon Delta Air Lines is expected to generate 1.43 times more return on investment than Pearson PLC. However, Delta Air is 1.43 times more volatile than Pearson PLC ADR. It trades about 0.07 of its potential returns per unit of risk. Pearson PLC ADR is currently generating about 0.06 per unit of risk. If you would invest 3,781 in Delta Air Lines on October 21, 2024 and sell it today you would earn a total of 2,801 from holding Delta Air Lines or generate 74.08% 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. Pearson PLC ADR
Performance |
| Timeline |
| Delta Air Lines |
| Pearson PLC ADR |
Delta Air and Pearson PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and Pearson PLC
The main advantage of trading using opposite Delta Air and Pearson PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Pearson PLC 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 Pearson PLC will offset losses from the drop in Pearson PLC's long position.| Delta Air vs. American Airlines Group | Delta Air vs. Southwest Airlines | Delta Air vs. JetBlue Airways Corp | Delta Air vs. United Airlines Holdings |
| Pearson PLC vs. John Wiley Sons | Pearson PLC vs. New York Times | Pearson PLC vs. Lee Enterprises Incorporated | Pearson PLC vs. John Wiley Sons |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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