Correlation Between International Game and Flutter Entertainment

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

Diversification Opportunities for International Game and Flutter Entertainment

-0.54

Correlation Coefficient

International Game  Flutter Entertainment

Excellent diversification

The 3 months correlation between International and Flutter is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding International Game Technology and Flutter Entertainment PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flutter Entertainment PLC 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 Flutter Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flutter Entertainment PLC has no effect on the direction of International Game i.e., International Game and Flutter Entertainment go up and down completely randomly.

Pair Corralation between International Game and Flutter Entertainment

Assuming the 90 days horizon International Game Technology is expected to under-perform the Flutter Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, International Game Technology is 1.28 times less risky than Flutter Entertainment. The stock trades about -0.04 of its potential returns per unit of risk. The Flutter Entertainment PLC is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  18,865  in Flutter Entertainment PLC on September 4, 2024 and sell it today you would earn a total of  7,385  from holding Flutter Entertainment PLC or generate 39.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

International Game Technology  vs.  Flutter Entertainment PLC

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 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.

Flutter Entertainment PLC

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Flutter Entertainment PLC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Flutter Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Game and Flutter Entertainment

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

The idea behind International Game Technology and Flutter Entertainment PLC 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.