Correlation Between Galaxy Gaming and KRAFT

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

By analyzing existing cross correlation between Galaxy Gaming and KRAFT FOODS INC, you can compare the effects of market volatilities on Galaxy Gaming and KRAFT 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 KRAFT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galaxy Gaming and KRAFT.

Diversification Opportunities for Galaxy Gaming and KRAFT

-0.07

Correlation Coefficient

Galaxy Gaming  KRAFT

Good diversification

The 3 months correlation between Galaxy and KRAFT is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Galaxy Gaming and KRAFT FOODS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KRAFT FOODS INC 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 KRAFT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KRAFT FOODS INC has no effect on the direction of Galaxy Gaming i.e., Galaxy Gaming and KRAFT go up and down completely randomly.

Pair Corralation between Galaxy Gaming and KRAFT

Given the investment horizon of 90 days Galaxy Gaming is expected to generate 4.89 times less return on investment than KRAFT. But when comparing it to its historical volatility, Galaxy Gaming is 4.75 times less risky than KRAFT. It trades about 0.09 of its potential returns per unit of risk. KRAFT FOODS INC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11,134  in KRAFT FOODS INC on December 22, 2024 and sell it today you would earn a total of  573.00  from holding KRAFT FOODS INC or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	28.33%
Values	Daily Returns

Galaxy Gaming  vs.  KRAFT FOODS INC

Galaxy Gaming

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Galaxy Gaming are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. 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.

KRAFT FOODS INC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KRAFT FOODS INC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, KRAFT sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Galaxy Gaming and KRAFT

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

The idea behind Galaxy Gaming and KRAFT FOODS INC 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.