Correlation Between International Game and Companhia Energética

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

By analyzing existing cross correlation between International Game Technology and Companhia Energtica de, you can compare the effects of market volatilities on International Game and Companhia Energética 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 International Game with a short position of Companhia Energética. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Game and Companhia Energética.

Diversification Opportunities for International Game and Companhia Energética

-0.06

Correlation Coefficient

International Game  Companhia Energética

Good diversification

The 3 months correlation between International and Companhia is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding International Game Technology and Companhia Energtica de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energética and International Game 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 International Game Technology are associated (or correlated) with Companhia Energética. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Energética has no effect on the direction of International Game i.e., International Game and Companhia Energética go up and down completely randomly.

Pair Corralation between International Game and Companhia Energética

Assuming the 90 days horizon International Game Technology is expected to generate 0.81 times more return on investment than Companhia Energética. However, International Game Technology is 1.24 times less risky than Companhia Energética. It trades about -0.03 of its potential returns per unit of risk. Companhia Energtica de is currently generating about -0.03 per unit of risk. If you would invest  1,631  in International Game Technology on December 26, 2024 and sell it today you would lose (71.00) from holding International Game Technology or give up 4.35% of portfolio value over 90 days.

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

International Game Technology  vs.  Companhia Energtica de

International Game

Risk-Adjusted Performance

Very Weak

Over the last 90 days International Game Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, International Game is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Companhia Energética

Risk-Adjusted Performance

Very Weak

Over the last 90 days Companhia Energtica de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Companhia Energética is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with International Game and Companhia Energética

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

The idea behind International Game Technology and Companhia Energtica de 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.