Correlation Between BRT Realty and American Airlines

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

Diversification Opportunities for BRT Realty and American Airlines

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between BRT and American is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding BRT Realty Trust and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines and BRT Realty 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 BRT Realty Trust 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 BRT Realty i.e., BRT Realty and American Airlines go up and down completely randomly.

Pair Corralation between BRT Realty and American Airlines

Considering the 90-day investment horizon BRT Realty Trust is expected to under-perform the American Airlines. But the stock apears to be less risky and, when comparing its historical volatility, BRT Realty Trust is 1.5 times less risky than American Airlines. The stock trades about -0.06 of its potential returns per unit of risk. The American Airlines Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,374  in American Airlines Group on December 29, 2023 and sell it today you would earn a total of  161.00  from holding American Airlines Group or generate 11.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

BRT Realty Trust  vs.  American Airlines Group

 Performance 
       Timeline  
BRT Realty Trust 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days BRT Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
American Airlines 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, American Airlines disclosed solid returns over the last few months and may actually be approaching a breakup point.

BRT Realty and American Airlines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with BRT Realty and American Airlines

The main advantage of trading using opposite BRT Realty and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRT Realty 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 BRT Realty Trust 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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