Correlation Between International Game and Carnival

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

Diversification Opportunities for International Game and Carnival

-0.76

Correlation Coefficient

International Game  Carnival

Pay attention - limited upside

The 3 months correlation between International and Carnival is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding International Game Technology and Carnival in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival 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 Carnival. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival has no effect on the direction of International Game i.e., International Game and Carnival go up and down completely randomly.

Pair Corralation between International Game and Carnival

Considering the 90-day investment horizon International Game Technology is expected to under-perform the Carnival. But the stock apears to be less risky and, when comparing its historical volatility, International Game Technology is 1.6 times less risky than Carnival. The stock trades about -0.07 of its potential returns per unit of risk. The Carnival is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,634  in Carnival on September 3, 2024 and sell it today you would earn a total of  909.00  from holding Carnival or generate 55.63% return on investment over 90 days.

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

International Game Technology  vs.  Carnival

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. In spite of comparatively stable technical and fundamental indicators, International Game is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Carnival

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Carnival are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental indicators, Carnival disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Game and Carnival

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

The idea behind International Game Technology and Carnival 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.