Correlation Between Delta Air and Hormel Foods

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

Diversification Opportunities for Delta Air and Hormel Foods

-0.05

Correlation Coefficient

Delta Air  Hormel Foods

Good diversification

The 3 months correlation between Delta and Hormel is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Hormel Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hormel Foods 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 Hormel Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hormel Foods has no effect on the direction of Delta Air i.e., Delta Air and Hormel Foods go up and down completely randomly.

Pair Corralation between Delta Air and Hormel Foods

Assuming the 90 days trading horizon Delta Air Lines is expected to generate 3.07 times more return on investment than Hormel Foods. However, Delta Air is 3.07 times more volatile than Hormel Foods. It trades about 0.01 of its potential returns per unit of risk. Hormel Foods is currently generating about 0.03 per unit of risk. If you would invest  26,757  in Delta Air Lines on March 24, 2025 and sell it today you would lose (383.00) from holding Delta Air Lines or give up 1.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Delta Air Lines  vs.  Hormel Foods

Delta Air Lines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delta Air Lines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Delta Air is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hormel Foods

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hormel Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hormel Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Delta Air and Hormel Foods

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

The idea behind Delta Air Lines and Hormel Foods 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.