Correlation Between Delta Air and Merck
Can any of the company-specific risk be diversified away by investing in both Delta Air and Merck 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 Merck 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 Merck Co, you can compare the effects of market volatilities on Delta Air and Merck 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 Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Merck.
Diversification Opportunities for Delta Air and Merck
Pay attention - limited upside
The 3 months correlation between Delta and Merck is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Merck Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck 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 Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck has no effect on the direction of Delta Air i.e., Delta Air and Merck go up and down completely randomly.
Pair Corralation between Delta Air and Merck
Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.61 times more return on investment than Merck. However, Delta Air is 1.61 times more volatile than Merck Co. It trades about 0.08 of its potential returns per unit of risk. Merck Co is currently generating about 0.02 per unit of risk. If you would invest 18,727 in Delta Air Lines on September 4, 2024 and sell it today you would earn a total of 19,881 from holding Delta Air Lines or generate 106.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 84.8% |
| Values | Daily Returns |
Delta Air Lines vs. Merck Co
Performance |
| Timeline |
| Delta Air Lines |
| Merck |
Delta Air and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and Merck
The main advantage of trading using opposite Delta Air and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.| Delta Air vs. Southwest Airlines Co | Delta Air vs. American Airlines Group | Delta Air vs. Gol Linhas Areas | Delta Air vs. Azul SA |
| Merck vs. Multilaser Industrial SA | Merck vs. Metalrgica Riosulense SA | Merck vs. Verizon Communications | Merck vs. Charter Communications |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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