Correlation Between Delta Air and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Delta Air and Prudential Financial 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 Prudential Financial 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 Prudential Financial, you can compare the effects of market volatilities on Delta Air and Prudential Financial 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Prudential Financial.
Diversification Opportunities for Delta Air and Prudential Financial
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Delta and Prudential is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Delta Air i.e., Delta Air and Prudential Financial go up and down completely randomly.
Pair Corralation between Delta Air and Prudential Financial
Assuming the 90 days trading horizon Delta Air is expected to generate 14.51 times less return on investment than Prudential Financial. In addition to that, Delta Air is 1.35 times more volatile than Prudential Financial. It trades about 0.01 of its total potential returns per unit of risk. Prudential Financial is currently generating about 0.22 per unit of volatility. If you would invest 35,866 in Prudential Financial on September 14, 2024 and sell it today you would earn a total of 2,624 from holding Prudential Financial or generate 7.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Delta Air Lines vs. Prudential Financial
Performance |
| Timeline |
| Delta Air Lines |
| Prudential Financial |
Delta Air and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and Prudential Financial
The main advantage of trading using opposite Delta Air and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Prudential Financial 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.| Delta Air vs. Southwest Airlines Co | Delta Air vs. United Airlines Holdings | Delta Air vs. American Airlines Group |
| Prudential Financial vs. Fundo Investimento Imobiliario | Prudential Financial vs. LESTE FDO INV | Prudential Financial vs. Fras le SA | Prudential Financial vs. Western Digital |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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