Correlation Between Pearson PLC and Delta Air
Can any of the company-specific risk be diversified away by investing in both Pearson 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 Pearson 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 Pearson PLC ADR and Delta Air Lines, you can compare the effects of market volatilities on Pearson 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 Pearson PLC with a short position of Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pearson PLC and Delta Air.
Diversification Opportunities for Pearson PLC and Delta Air
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Pearson and Delta is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Pearson PLC ADR 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 Pearson 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 Pearson PLC ADR 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 Pearson PLC i.e., Pearson PLC and Delta Air go up and down completely randomly.
Pair Corralation between Pearson PLC and Delta Air
Considering the 90-day investment horizon Pearson PLC is expected to generate 1.54 times less return on investment than Delta Air. But when comparing it to its historical volatility, Pearson PLC ADR is 1.43 times less risky than Delta Air. It trades about 0.06 of its potential returns per unit of risk. Delta Air Lines is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,781 in Delta Air Lines on October 21, 2024 and sell it today you would earn a total of 2,801 from holding Delta Air Lines or generate 74.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pearson PLC ADR vs. Delta Air Lines
Performance |
| Timeline |
| Pearson PLC ADR |
| Delta Air Lines |
Pearson PLC and Delta Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pearson PLC and Delta Air
The main advantage of trading using opposite Pearson PLC and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pearson 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.| Pearson PLC vs. John Wiley Sons | Pearson PLC vs. New York Times | Pearson PLC vs. Lee Enterprises Incorporated | Pearson PLC vs. John Wiley Sons |
| Delta Air vs. American Airlines Group | Delta Air vs. Southwest Airlines | Delta Air vs. JetBlue Airways Corp | Delta Air vs. United Airlines Holdings |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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