Correlation Between Delta Air and Home Depot
Can any of the company-specific risk be diversified away by investing in both Delta Air and Home Depot 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 Home Depot 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 The Home Depot, you can compare the effects of market volatilities on Delta Air and Home Depot 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 Home Depot. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Home Depot.
Diversification Opportunities for Delta Air and Home Depot
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Delta and Home is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and The Home Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Depot 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 Home Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Depot has no effect on the direction of Delta Air i.e., Delta Air and Home Depot go up and down completely randomly.
Pair Corralation between Delta Air and Home Depot
Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.4 times more return on investment than Home Depot. However, Delta Air is 1.4 times more volatile than The Home Depot. It trades about 0.17 of its potential returns per unit of risk. The Home Depot is currently generating about -0.03 per unit of risk. If you would invest 36,402 in Delta Air Lines on November 4, 2024 and sell it today you would earn a total of 2,947 from holding Delta Air Lines or generate 8.1% 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. The Home Depot
Performance |
| Timeline |
| Delta Air Lines |
| Home Depot |
Delta Air and Home Depot Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and Home Depot
The main advantage of trading using opposite Delta Air and Home Depot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Home Depot 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 Home Depot will offset losses from the drop in Home Depot's long position.| Delta Air vs. Technos SA | Delta Air vs. Spotify Technology SA | Delta Air vs. Palantir Technologies | Delta Air vs. TechnipFMC plc |
| Home Depot vs. DXC Technology | Home Depot vs. SVB Financial Group | Home Depot vs. METISA Metalrgica Timboense | Home Depot vs. Citizens Financial Group, |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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