Correlation Between Cisco Systems and Delta Air

Can any of the company-specific risk be diversified away by investing in both Cisco Systems 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 Cisco Systems and Delta Air into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cisco Systems and Delta Air Lines, you can compare the effects of market volatilities on Cisco Systems 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 Cisco Systems with a short position of Delta Air. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Delta Air.

Diversification Opportunities for Cisco Systems and Delta Air

0.71

Correlation Coefficient

Cisco Systems  Delta Air

Poor diversification

The 3 months correlation between Cisco and Delta is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems 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 Cisco Systems 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 Cisco Systems 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 Cisco Systems i.e., Cisco Systems and Delta Air go up and down completely randomly.

Pair Corralation between Cisco Systems and Delta Air

Assuming the 90 days trading horizon Cisco Systems is expected to generate 1.58 times less return on investment than Delta Air. But when comparing it to its historical volatility, Cisco Systems is 2.32 times less risky than Delta Air. It trades about 0.19 of its potential returns per unit of risk. Delta Air Lines is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  81,959  in Delta Air Lines on April 24, 2025 and sell it today you would earn a total of  21,041  from holding Delta Air Lines or generate 25.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Cisco Systems  vs.  Delta Air Lines

Cisco Systems

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Cisco Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Delta Air Lines

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delta Air Lines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Delta Air showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cisco Systems and Delta Air

The main advantage of trading using opposite Cisco Systems and Delta Air positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems 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 Cisco Systems 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.