Correlation Between Delta Air and Western Acquisition
Can any of the company-specific risk be diversified away by investing in both Delta Air and Western Acquisition 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 Western Acquisition 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 Western Acquisition Ventures, you can compare the effects of market volatilities on Delta Air and Western Acquisition 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 Western Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Western Acquisition.
Diversification Opportunities for Delta Air and Western Acquisition
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Delta and Western is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition 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 Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of Delta Air i.e., Delta Air and Western Acquisition go up and down completely randomly.
Pair Corralation between Delta Air and Western Acquisition
Considering the 90-day investment horizon Delta Air is expected to generate 1.81 times less return on investment than Western Acquisition. But when comparing it to its historical volatility, Delta Air Lines is 1.27 times less risky than Western Acquisition. It trades about 0.18 of its potential returns per unit of risk. Western Acquisition Ventures is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,154 in Western Acquisition Ventures on October 25, 2024 and sell it today you would earn a total of 181.00 from holding Western Acquisition Ventures or generate 15.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Delta Air Lines vs. Western Acquisition Ventures
Performance |
| Timeline |
| Delta Air Lines |
| Western Acquisition |
Delta Air and Western Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and Western Acquisition
The main advantage of trading using opposite Delta Air and Western Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Western Acquisition 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 Western Acquisition will offset losses from the drop in Western Acquisition'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 |
| Western Acquisition vs. Two Harbors Investments | Western Acquisition vs. Old Republic International | Western Acquisition vs. Virtus Investment Partners, | Western Acquisition vs. Verra Mobility Corp |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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