Correlation Between Diageo Plc and Delta Air
Can any of the company-specific risk be diversified away by investing in both Diageo Plc and Delta Air 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 Diageo Plc and Delta Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diageo plc and Delta Air Lines, you can compare the effects of market volatilities on Diageo Plc and Delta Air 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 Diageo Plc with a short position of Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diageo Plc and Delta Air.
Diversification Opportunities for Diageo Plc and Delta Air
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Diageo and Delta is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Diageo plc and Delta Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Air Lines and Diageo Plc 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 Diageo plc are associated (or correlated) with Delta Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Air Lines has no effect on the direction of Diageo Plc i.e., Diageo Plc and Delta Air go up and down completely randomly.
Pair Corralation between Diageo Plc and Delta Air
Assuming the 90 days trading horizon Diageo plc is expected to under-perform the Delta Air. But the stock apears to be less risky and, when comparing its historical volatility, Diageo plc is 2.2 times less risky than Delta Air. The stock trades about -0.27 of its potential returns per unit of risk. The Delta Air Lines is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 126,566 in Delta Air Lines on October 25, 2024 and sell it today you would earn a total of 12,834 from holding Delta Air Lines or generate 10.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diageo plc vs. Delta Air Lines
Performance |
| Timeline |
| Diageo plc |
| Delta Air Lines |
Diageo Plc and Delta Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diageo Plc and Delta Air
The main advantage of trading using opposite Diageo Plc and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diageo Plc position performs unexpectedly, Delta Air 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 Delta Air will offset losses from the drop in Delta Air's long position.| Diageo Plc vs. UnitedHealth Group Incorporated | Diageo Plc vs. Lloyds Banking Group | Diageo Plc vs. First Republic Bank | Diageo Plc vs. United Airlines Holdings |
| Delta Air vs. Grupo Hotelero Santa | Delta Air vs. Grupo Sports World | Delta Air vs. Grupo Industrial Saltillo | Delta Air vs. Grupo Carso SAB |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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