Correlation Between Delta Air and FedEx
Can any of the company-specific risk be diversified away by investing in both Delta Air and FedEx 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 FedEx 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 FedEx, you can compare the effects of market volatilities on Delta Air and FedEx 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 FedEx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and FedEx.
Diversification Opportunities for Delta Air and FedEx
Very weak diversification
The 3 months correlation between Delta and FedEx is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx 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 FedEx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx has no effect on the direction of Delta Air i.e., Delta Air and FedEx go up and down completely randomly.
Pair Corralation between Delta Air and FedEx
Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.01 times more return on investment than FedEx. However, Delta Air is 1.01 times more volatile than FedEx. It trades about 0.09 of its potential returns per unit of risk. FedEx is currently generating about 0.07 per unit of risk. If you would invest 17,185 in Delta Air Lines on September 13, 2024 and sell it today you would earn a total of 20,599 from holding Delta Air Lines or generate 119.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 93.58% |
| Values | Daily Returns |
Delta Air Lines vs. FedEx
Performance |
| Timeline |
| Delta Air Lines |
| FedEx |
Delta Air and FedEx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and FedEx
The main advantage of trading using opposite Delta Air and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, FedEx 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 FedEx will offset losses from the drop in FedEx's long position.| Delta Air vs. Southwest Airlines Co | Delta Air vs. United Airlines Holdings | Delta Air vs. American Airlines Group |
| FedEx vs. Micron Technology | FedEx vs. Paycom Software | FedEx vs. Delta Air Lines | FedEx vs. Brpr Corporate Offices |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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