Correlation Between Delta Air and United Airlines
Can any of the company-specific risk be diversified away by investing in both Delta Air and United Airlines 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 United Airlines 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 United Airlines Holdings, you can compare the effects of market volatilities on Delta Air and United Airlines 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 United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and United Airlines.
Diversification Opportunities for Delta Air and United Airlines
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Delta and United is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings 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 United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of Delta Air i.e., Delta Air and United Airlines go up and down completely randomly.
Pair Corralation between Delta Air and United Airlines
Assuming the 90 days horizon Delta Air is expected to generate 1.32 times less return on investment than United Airlines. But when comparing it to its historical volatility, Delta Air Lines is 1.23 times less risky than United Airlines. It trades about 0.08 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,594 in United Airlines Holdings on August 31, 2024 and sell it today you would earn a total of 4,548 from holding United Airlines Holdings or generate 99.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Delta Air Lines vs. United Airlines Holdings
Performance |
| Timeline |
| Delta Air Lines |
| United Airlines Holdings |
Delta Air and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and United Airlines
The main advantage of trading using opposite Delta Air and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, United Airlines 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 United Airlines will offset losses from the drop in United Airlines' long position.| Delta Air vs. New Residential Investment | Delta Air vs. TERADATA | Delta Air vs. CSSC Offshore Marine | Delta Air vs. SIEM OFFSHORE NEW |
| United Airlines vs. Southwest Airlines Co | United Airlines vs. Superior Plus Corp | United Airlines vs. NMI Holdings | United Airlines vs. Origin Agritech |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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