Correlation Between International Game and Sovereign Metals

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

Diversification Opportunities for International Game and Sovereign Metals

0.04

Correlation Coefficient

International Game  Sovereign Metals

Significant diversification

The 3 months correlation between International and Sovereign is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding International Game Technology and Sovereign Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sovereign Metals 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 Sovereign Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sovereign Metals has no effect on the direction of International Game i.e., International Game and Sovereign Metals go up and down completely randomly.

Pair Corralation between International Game and Sovereign Metals

Assuming the 90 days horizon International Game Technology is expected to under-perform the Sovereign Metals. But the stock apears to be less risky and, when comparing its historical volatility, International Game Technology is 1.44 times less risky than Sovereign Metals. The stock trades about -0.09 of its potential returns per unit of risk. The Sovereign Metals Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Sovereign Metals Limited on October 24, 2024 and sell it today you would earn a total of  4.00  from holding Sovereign Metals Limited or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

International Game Technology  vs.  Sovereign Metals Limited

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sovereign Metals

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sovereign Metals Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Sovereign Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Game and Sovereign Metals

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

The idea behind International Game Technology and Sovereign Metals Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.