Correlation Between International Game and Hongkong Land

Can any of the company-specific risk be diversified away by investing in both International Game and Hongkong Land 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 Hongkong Land 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 Hongkong Land Holdings, you can compare the effects of market volatilities on International Game and Hongkong Land 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 Hongkong Land. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Game and Hongkong Land.

Diversification Opportunities for International Game and Hongkong Land

-0.35

Correlation Coefficient

International Game  Hongkong Land

Very good diversification

The 3 months correlation between International and Hongkong is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding International Game Technology and Hongkong Land Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongkong Land Holdings 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 Hongkong Land. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongkong Land Holdings has no effect on the direction of International Game i.e., International Game and Hongkong Land go up and down completely randomly.

Pair Corralation between International Game and Hongkong Land

Assuming the 90 days horizon International Game Technology is expected to under-perform the Hongkong Land. But the stock apears to be less risky and, when comparing its historical volatility, International Game Technology is 1.09 times less risky than Hongkong Land. The stock trades about -0.02 of its potential returns per unit of risk. The Hongkong Land Holdings is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  292.00  in Hongkong Land Holdings on September 26, 2024 and sell it today you would earn a total of  130.00  from holding Hongkong Land Holdings or generate 44.52% return on investment over 90 days.

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

International Game Technology  vs.  Hongkong Land Holdings

International Game

Risk-Adjusted Performance

0 of 100

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hongkong Land Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hongkong Land Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Hongkong Land reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Game and Hongkong Land

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

The idea behind International Game Technology and Hongkong Land Holdings 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.