Correlation Between Delta Air and American Express
Can any of the company-specific risk be diversified away by investing in both Delta Air and American Express 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 American Express 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 American Express, you can compare the effects of market volatilities on Delta Air and American Express 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 American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and American Express.
Diversification Opportunities for Delta Air and American Express
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Delta and American is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of Delta Air i.e., Delta Air and American Express go up and down completely randomly.
Pair Corralation between Delta Air and American Express
Considering the 90-day investment horizon Delta Air Lines is expected to generate 1.05 times more return on investment than American Express. However, Delta Air is 1.05 times more volatile than American Express. It trades about 0.27 of its potential returns per unit of risk. American Express is currently generating about 0.18 per unit of risk. If you would invest 4,179 in Delta Air Lines on January 25, 2024 and sell it today you would earn a total of 744.00 from holding Delta Air Lines or generate 17.8% 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. American Express
Performance |
| Timeline |
| Delta Air Lines |
| American Express |
Delta Air and American Express Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Delta Air and American Express
The main advantage of trading using opposite Delta Air and American Express positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, American Express 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 American Express will offset losses from the drop in American Express' long position.| Delta Air vs. American Airlines Group | Delta Air vs. Southwest Airlines | Delta Air vs. JetBlue Airways Corp | Delta Air vs. Spirit Airlines |
| American Express vs. Visa Class A | American Express vs. PayPal Holdings | American Express vs. Capital One Financial | American Express vs. Upstart HoldingsInc |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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