Correlation Between DELTA AIR and NetApp
Can any of the company-specific risk be diversified away by investing in both DELTA AIR and NetApp 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 NetApp 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 NetApp Inc, you can compare the effects of market volatilities on DELTA AIR and NetApp 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 NetApp. Check out your portfolio center. Please also check ongoing floating volatility patterns of DELTA AIR and NetApp.
Diversification Opportunities for DELTA AIR and NetApp
Poor diversification
The 3 months correlation between DELTA and NetApp is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding DELTA AIR LINES and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc 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 NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of DELTA AIR i.e., DELTA AIR and NetApp go up and down completely randomly.
Pair Corralation between DELTA AIR and NetApp
Assuming the 90 days trading horizon DELTA AIR is expected to generate 1.26 times less return on investment than NetApp. But when comparing it to its historical volatility, DELTA AIR LINES is 1.07 times less risky than NetApp. It trades about 0.07 of its potential returns per unit of risk. NetApp Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 5,580 in NetApp Inc on September 4, 2024 and sell it today you would earn a total of 5,874 from holding NetApp Inc or generate 105.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DELTA AIR LINES vs. NetApp Inc
Performance |
| Timeline |
| DELTA AIR LINES |
| NetApp Inc |
DELTA AIR and NetApp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DELTA AIR and NetApp
The main advantage of trading using opposite DELTA AIR and NetApp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DELTA AIR position performs unexpectedly, NetApp 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 NetApp will offset losses from the drop in NetApp's long position.The idea behind DELTA AIR LINES and NetApp Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| NetApp vs. Teradata Corp | NetApp vs. Superior Plus Corp | NetApp vs. NMI Holdings | NetApp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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