Correlation Between Delta Air and Otis Worldwide
Can any of the company-specific risk be diversified away by investing in both Delta Air and Otis Worldwide 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 Otis Worldwide 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 Otis Worldwide, you can compare the effects of market volatilities on Delta Air and Otis Worldwide 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 Otis Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Otis Worldwide.
Diversification Opportunities for Delta Air and Otis Worldwide
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Delta and Otis is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Otis Worldwide in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otis Worldwide 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 Otis Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otis Worldwide has no effect on the direction of Delta Air i.e., Delta Air and Otis Worldwide go up and down completely randomly.
Pair Corralation between Delta Air and Otis Worldwide
Assuming the 90 days trading horizon Delta Air Lines is expected to generate 2.04 times more return on investment than Otis Worldwide. However, Delta Air is 2.04 times more volatile than Otis Worldwide. It trades about 0.27 of its potential returns per unit of risk. Otis Worldwide is currently generating about 0.19 per unit of risk. If you would invest 24,871 in Delta Air Lines on September 12, 2024 and sell it today you would earn a total of 12,913 from holding Delta Air Lines or generate 51.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.83% |
| Values | Daily Returns |
Delta Air Lines vs. Otis Worldwide
Performance |
| Timeline |
| Delta Air Lines |
| Otis Worldwide |
Delta Air and Otis Worldwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and Otis Worldwide
The main advantage of trading using opposite Delta Air and Otis Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Otis Worldwide 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 Otis Worldwide will offset losses from the drop in Otis Worldwide's long position.| Delta Air vs. Southwest Airlines Co | Delta Air vs. United Airlines Holdings | Delta Air vs. American Airlines Group |
| Otis Worldwide vs. Metalrgica Riosulense SA | Otis Worldwide vs. Micron Technology | Otis Worldwide vs. Beyond Meat | Otis Worldwide vs. Waste Management |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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