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
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Delta and United is 0.77. 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
Considering the 90-day investment horizon Delta Air Lines is expected to generate 0.67 times more return on investment than United Airlines. However, Delta Air Lines is 1.49 times less risky than United Airlines. It trades about 0.19 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.11 per unit of risk. If you would invest 3,409 in Delta Air Lines on February 6, 2024 and sell it today you would earn a total of 1,775 from holding Delta Air Lines or generate 52.07% 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. 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. American Airlines Group | Delta Air vs. Southwest Airlines | Delta Air vs. JetBlue Airways Corp | Delta Air vs. Spirit Airlines |
| United Airlines vs. American Airlines Group | United Airlines vs. Southwest Airlines | United Airlines vs. JetBlue Airways Corp | United Airlines vs. Spirit Airlines |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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