Correlation Between Great Lakes and American Airlines

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

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

Diversification Opportunities for Great Lakes and American Airlines

0.21

Correlation Coefficient

Great Lakes  American Airlines

Modest diversification

The 3 months correlation between Great and American is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Great Lakes Aviation and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and Great Lakes 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 Great Lakes Aviation 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 Great Lakes i.e., Great Lakes and American Airlines go up and down completely randomly.

Pair Corralation between Great Lakes and American Airlines

If you would invest  0.01  in Great Lakes Aviation on January 21, 2024 and sell it today you would earn a total of  0.00  from holding Great Lakes Aviation or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Great Lakes Aviation  vs.  American Airlines Group

Great Lakes Aviation

Risk-Adjusted Performance

0 of 100

Very Weak

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

American Airlines

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, American Airlines is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Great Lakes and American Airlines

The main advantage of trading using opposite Great Lakes and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Lakes 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 Great Lakes Aviation 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.