Correlation Between CSX and Delta Air

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Can any of the company-specific risk be diversified away by investing in both CSX 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 CSX and Delta Air into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSX Corporation and Delta Air Lines, you can compare the effects of market volatilities on CSX 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 CSX with a short position of Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSX and Delta Air.

Diversification Opportunities for CSX and Delta Air

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between CSX and Delta is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CSX Corp. 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 CSX 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 CSX Corporation 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 CSX i.e., CSX and Delta Air go up and down completely randomly.

Pair Corralation between CSX and Delta Air

Considering the 90-day investment horizon CSX is expected to generate 4.19 times less return on investment than Delta Air. But when comparing it to its historical volatility, CSX Corporation is 1.49 times less risky than Delta Air. It trades about 0.03 of its potential returns per unit of risk. Delta Air Lines is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,286  in Delta Air Lines on September 3, 2024 and sell it today you would earn a total of  3,096  from holding Delta Air Lines or generate 94.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

CSX Corp.  vs.  Delta Air Lines

 Performance 
       Timeline  
CSX Corporation 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in CSX Corporation are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, CSX may actually be approaching a critical reversion point that can send shares even higher in January 2025.
Delta Air Lines 

Risk-Adjusted Performance

24 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Delta Air disclosed solid returns over the last few months and may actually be approaching a breakup point.

CSX and Delta Air Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CSX and Delta Air

The main advantage of trading using opposite CSX and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSX 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.
The idea behind CSX Corporation and Delta Air Lines 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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