Correlation Between Evolution and International Game

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

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

Diversification Opportunities for Evolution and International Game

0.43

Correlation Coefficient

Evolution  International Game

Very weak diversification

The 3 months correlation between Evolution and International is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Evolution AB and International Game Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Game and Evolution 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 Evolution AB are associated (or correlated) with International Game. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Game has no effect on the direction of Evolution i.e., Evolution and International Game go up and down completely randomly.

Pair Corralation between Evolution and International Game

Assuming the 90 days trading horizon Evolution AB is expected to under-perform the International Game. In addition to that, Evolution is 1.16 times more volatile than International Game Technology. It trades about -0.03 of its total potential returns per unit of risk. International Game Technology is currently generating about -0.01 per unit of volatility. If you would invest  1,899  in International Game Technology on September 12, 2024 and sell it today you would lose (49.00) from holding International Game Technology or give up 2.58% of portfolio value over 90 days.

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

Evolution AB  vs.  International Game Technology

Evolution AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Evolution and International Game

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

The idea behind Evolution AB and International Game Technology 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.