Correlation Between Delta Air and Ross Stores

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

Diversification Opportunities for Delta Air and Ross Stores

0.48

Correlation Coefficient

Delta Air  Ross Stores

Very weak diversification

The 3 months correlation between Delta and Ross is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Ross Stores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ross Stores 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 Ross Stores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ross Stores has no effect on the direction of Delta Air i.e., Delta Air and Ross Stores go up and down completely randomly.

Pair Corralation between Delta Air and Ross Stores

Assuming the 90 days trading horizon Delta Air Lines is expected to generate 1.41 times more return on investment than Ross Stores. However, Delta Air is 1.41 times more volatile than Ross Stores. It trades about -0.13 of its potential returns per unit of risk. Ross Stores is currently generating about -0.3 per unit of risk. If you would invest  126,195  in Delta Air Lines on December 26, 2024 and sell it today you would lose (28,795) from holding Delta Air Lines or give up 22.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	40.98%
Values	Daily Returns

Delta Air Lines  vs.  Ross Stores

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. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Ross Stores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ross Stores has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Delta Air and Ross Stores

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

The idea behind Delta Air Lines and Ross Stores 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.