Correlation Between Delta Air and Banco Bilbao

Can any of the company-specific risk be diversified away by investing in both Delta Air and Banco Bilbao 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 Banco Bilbao 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 Banco Bilbao Vizcaya, you can compare the effects of market volatilities on Delta Air and Banco Bilbao 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 Banco Bilbao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delta Air and Banco Bilbao.

Diversification Opportunities for Delta Air and Banco Bilbao

0.3

Correlation Coefficient

Delta Air  Banco Bilbao

Weak diversification

The 3 months correlation between Delta and Banco is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Banco Bilbao Vizcaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bilbao Vizcaya 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 Banco Bilbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bilbao Vizcaya has no effect on the direction of Delta Air i.e., Delta Air and Banco Bilbao go up and down completely randomly.

Pair Corralation between Delta Air and Banco Bilbao

Assuming the 90 days trading horizon Delta Air Lines is expected to under-perform the Banco Bilbao. But the stock apears to be less risky and, when comparing its historical volatility, Delta Air Lines is 2.47 times less risky than Banco Bilbao. The stock trades about -0.04 of its potential returns per unit of risk. The Banco Bilbao Vizcaya is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  17,750  in Banco Bilbao Vizcaya on March 2, 2024 and sell it today you would lose (50.00) from holding Banco Bilbao Vizcaya or give up 0.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Delta Air Lines  vs.  Banco Bilbao Vizcaya

Delta Air Lines

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Delta Air showed solid returns over the last few months and may actually be approaching a breakup point.

Banco Bilbao Vizcaya

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bilbao Vizcaya are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Banco Bilbao may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Delta Air and Banco Bilbao

The main advantage of trading using opposite Delta Air and Banco Bilbao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delta Air position performs unexpectedly, Banco Bilbao 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 Banco Bilbao will offset losses from the drop in Banco Bilbao's long position.

The idea behind Delta Air Lines and Banco Bilbao Vizcaya 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.