Correlation Between Galaxy Gaming and American Airlines

Can any of the company-specific risk be diversified away by investing in both Galaxy Gaming and American Airlines 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 Galaxy Gaming and American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Galaxy Gaming and American Airlines Group, you can compare the effects of market volatilities on Galaxy Gaming and American Airlines 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 Galaxy Gaming with a short position of American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galaxy Gaming and American Airlines.

Diversification Opportunities for Galaxy Gaming and American Airlines

0.05

Correlation Coefficient

Galaxy Gaming  American Airlines

Significant diversification

The 3 months correlation between Galaxy and American is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Galaxy Gaming and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Galaxy Gaming 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 Galaxy Gaming are associated (or correlated) with American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Galaxy Gaming i.e., Galaxy Gaming and American Airlines go up and down completely randomly.

Pair Corralation between Galaxy Gaming and American Airlines

Given the investment horizon of 90 days Galaxy Gaming is expected to generate 2.19 times more return on investment than American Airlines. However, Galaxy Gaming is 2.19 times more volatile than American Airlines Group. It trades about 0.02 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.02 per unit of risk. If you would invest  309.00  in Galaxy Gaming on October 11, 2024 and sell it today you would lose (33.00) from holding Galaxy Gaming or give up 10.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Galaxy Gaming  vs.  American Airlines Group

Galaxy Gaming

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galaxy Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Galaxy Gaming is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Airlines

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, American Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Galaxy Gaming and American Airlines

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

The idea behind Galaxy Gaming and American Airlines Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.