Correlation Between Delta Air and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both Delta Air and Alcoa Corp 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 Alcoa Corp 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 Alcoa Corp, you can compare the effects of market volatilities on Delta Air and Alcoa Corp 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 Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Alcoa Corp.
Diversification Opportunities for Delta Air and Alcoa Corp
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Delta and Alcoa is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp 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 Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Delta Air i.e., Delta Air and Alcoa Corp go up and down completely randomly.
Pair Corralation between Delta Air and Alcoa Corp
Considering the 90-day investment horizon Delta Air is expected to generate 3.01 times less return on investment than Alcoa Corp. But when comparing it to its historical volatility, Delta Air Lines is 1.3 times less risky than Alcoa Corp. It trades about 0.12 of its potential returns per unit of risk. Alcoa Corp is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 3,158 in Alcoa Corp on January 26, 2024 and sell it today you would earn a total of 450.00 from holding Alcoa Corp or generate 14.25% 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. Alcoa Corp
Performance |
| Timeline |
| Delta Air Lines |
| Alcoa Corp |
Delta Air and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and Alcoa Corp
The main advantage of trading using opposite Delta Air and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Alcoa Corp 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.| Delta Air vs. American Airlines Group | Delta Air vs. Southwest Airlines | Delta Air vs. JetBlue Airways Corp | Delta Air vs. Spirit Airlines |
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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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