Correlation Between Kao Fong and International Games

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

By analyzing existing cross correlation between Kao Fong Machinery and International Games System, you can compare the effects of market volatilities on Kao Fong and International Games 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 Kao Fong with a short position of International Games. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kao Fong and International Games.

Diversification Opportunities for Kao Fong and International Games

-0.32

Correlation Coefficient

Kao Fong  International Games

Very good diversification

The 3 months correlation between Kao and International is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Kao Fong Machinery and International Games System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Games and Kao Fong 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 Kao Fong Machinery are associated (or correlated) with International Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Games has no effect on the direction of Kao Fong i.e., Kao Fong and International Games go up and down completely randomly.

Pair Corralation between Kao Fong and International Games

Assuming the 90 days trading horizon Kao Fong is expected to generate 1.75 times less return on investment than International Games. In addition to that, Kao Fong is 1.56 times more volatile than International Games System. It trades about 0.04 of its total potential returns per unit of risk. International Games System is currently generating about 0.1 per unit of volatility. If you would invest  85,000  in International Games System on September 24, 2024 and sell it today you would earn a total of  13,200  from holding International Games System or generate 15.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Kao Fong Machinery  vs.  International Games System

Kao Fong Machinery

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kao Fong Machinery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kao Fong may actually be approaching a critical reversion point that can send shares even higher in January 2025.

International Games

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Games System are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, International Games showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kao Fong and International Games

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

The idea behind Kao Fong Machinery and International Games System 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..