Correlation Between Delta Air and Texas Roadhouse

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

Diversification Opportunities for Delta Air and Texas Roadhouse

0.49

Correlation Coefficient

Delta Air  Texas Roadhouse

Very weak diversification

The 3 months correlation between Delta and Texas is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Delta Air Lines and Texas Roadhouse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Roadhouse 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 Texas Roadhouse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Roadhouse has no effect on the direction of Delta Air i.e., Delta Air and Texas Roadhouse go up and down completely randomly.

Pair Corralation between Delta Air and Texas Roadhouse

Assuming the 90 days horizon Delta Air Lines is expected to under-perform the Texas Roadhouse. In addition to that, Delta Air is 1.64 times more volatile than Texas Roadhouse. It trades about -0.16 of its total potential returns per unit of risk. Texas Roadhouse is currently generating about -0.09 per unit of volatility. If you would invest  17,391  in Texas Roadhouse on December 20, 2024 and sell it today you would lose (1,793) from holding Texas Roadhouse or give up 10.31% of portfolio value over 90 days.

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

Delta Air Lines  vs.  Texas Roadhouse

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Texas Roadhouse

Risk-Adjusted Performance

Very Weak

Over the last 90 days Texas Roadhouse has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Delta Air and Texas Roadhouse

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

The idea behind Delta Air Lines and Texas Roadhouse 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.