Correlation Between Scientific Games and Carsales

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

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

Diversification Opportunities for Scientific Games and Carsales

0.62

Correlation Coefficient

Scientific Games  Carsales

Poor diversification

The 3 months correlation between Scientific and Carsales is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Scientific Games and Carsales in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carsales and Scientific Games 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 Scientific Games are associated (or correlated) with Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carsales has no effect on the direction of Scientific Games i.e., Scientific Games and Carsales go up and down completely randomly.

Pair Corralation between Scientific Games and Carsales

Assuming the 90 days horizon Scientific Games is expected to generate 1.38 times less return on investment than Carsales. In addition to that, Scientific Games is 1.41 times more volatile than Carsales. It trades about 0.04 of its total potential returns per unit of risk. Carsales is currently generating about 0.07 per unit of volatility. If you would invest  1,596  in Carsales on September 26, 2024 and sell it today you would earn a total of  624.00  from holding Carsales or generate 39.1% return on investment over 90 days.

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

Scientific Games  vs.  Carsales

Scientific Games

Risk-Adjusted Performance

0 of 100

Very Weak

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

Carsales

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carsales has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Carsales is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Scientific Games and Carsales

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

The idea behind Scientific Games and Carsales 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .