Correlation Between TFS FINANCIAL and International Game

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

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

Diversification Opportunities for TFS FINANCIAL and International Game

-0.24

Correlation Coefficient

TFS FINANCIAL  International Game

Very good diversification

The 3 months correlation between TFS and International is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and International Game Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Game and TFS FINANCIAL 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 TFS FINANCIAL 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 TFS FINANCIAL i.e., TFS FINANCIAL and International Game go up and down completely randomly.

Pair Corralation between TFS FINANCIAL and International Game

Assuming the 90 days trading horizon TFS FINANCIAL is expected to generate 1.01 times more return on investment than International Game. However, TFS FINANCIAL is 1.01 times more volatile than International Game Technology. It trades about 0.11 of its potential returns per unit of risk. International Game Technology is currently generating about -0.04 per unit of risk. If you would invest  1,136  in TFS FINANCIAL on September 13, 2024 and sell it today you would earn a total of  154.00  from holding TFS FINANCIAL or generate 13.56% return on investment over 90 days.

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

TFS FINANCIAL  vs.  International Game Technology

TFS FINANCIAL

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TFS FINANCIAL are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TFS FINANCIAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 TFS FINANCIAL and International Game

The main advantage of trading using opposite TFS FINANCIAL and International Game positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFS FINANCIAL 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 TFS FINANCIAL 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.