Correlation Between International Game and Despegar Corp

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

Diversification Opportunities for International Game and Despegar Corp

-0.83

Correlation Coefficient

International Game  Despegar Corp

Pay attention - limited upside

The 3 months correlation between International and Despegar is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding International Game Technology and Despegar Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Despegar Corp 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 Despegar Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Despegar Corp has no effect on the direction of International Game i.e., International Game and Despegar Corp go up and down completely randomly.

Pair Corralation between International Game and Despegar Corp

Considering the 90-day investment horizon International Game Technology is expected to under-perform the Despegar Corp. But the stock apears to be less risky and, when comparing its historical volatility, International Game Technology is 2.62 times less risky than Despegar Corp. The stock trades about -0.13 of its potential returns per unit of risk. The Despegar Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,177  in Despegar Corp on September 3, 2024 and sell it today you would earn a total of  612.00  from holding Despegar Corp or generate 52.0% return on investment over 90 days.

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

International Game Technology  vs.  Despegar Corp

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 latest conflicting performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Despegar Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Despegar Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Despegar Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Game and Despegar Corp

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

The idea behind International Game Technology and Despegar Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.