Correlation Between Ross Stores and Delta Air
Can any of the company-specific risk be diversified away by investing in both Ross Stores and Delta Air 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 Ross Stores and Delta Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ross Stores and Delta Air Lines, you can compare the effects of market volatilities on Ross Stores and Delta Air 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 Ross Stores with a short position of Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ross Stores and Delta Air.
Diversification Opportunities for Ross Stores and Delta Air
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ross and Delta is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ross Stores and Delta Air Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delta Air Lines and Ross Stores 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 Ross Stores are associated (or correlated) with Delta Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delta Air Lines has no effect on the direction of Ross Stores i.e., Ross Stores and Delta Air go up and down completely randomly.
Pair Corralation between Ross Stores and Delta Air
Assuming the 90 days trading horizon Ross Stores is expected to under-perform the Delta Air. But the stock apears to be less risky and, when comparing its historical volatility, Ross Stores is 1.27 times less risky than Delta Air. The stock trades about -0.55 of its potential returns per unit of risk. The Delta Air Lines is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest 139,298 in Delta Air Lines on November 28, 2024 and sell it today you would lose (12,198) from holding Delta Air Lines or give up 8.76% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 45.45% |
| Values | Daily Returns |
Ross Stores vs. Delta Air Lines
Performance |
| Timeline |
| Ross Stores |
| Delta Air Lines |
Ross Stores and Delta Air Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ross Stores and Delta Air
The main advantage of trading using opposite Ross Stores and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ross Stores position performs unexpectedly, Delta Air 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 Delta Air will offset losses from the drop in Delta Air's long position.| Ross Stores vs. Micron Technology | Ross Stores vs. GMxico Transportes SAB | Ross Stores vs. Capital One Financial | Ross Stores vs. Grupo Sports World |
| Delta Air vs. Grupo Sports World | Delta Air vs. Applied Materials | Delta Air vs. Steel Dynamics | Delta Air vs. Grupo Hotelero Santa |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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