Correlation Between Yokohama Rubber and Scientific Games

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

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

Diversification Opportunities for Yokohama Rubber and Scientific Games

-0.35

Correlation Coefficient

Yokohama Rubber  Scientific Games

Very good diversification

The 3 months correlation between Yokohama and Scientific is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding The Yokohama Rubber and Scientific Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Games and Yokohama Rubber 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 The Yokohama Rubber are associated (or correlated) with Scientific Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scientific Games has no effect on the direction of Yokohama Rubber i.e., Yokohama Rubber and Scientific Games go up and down completely randomly.

Pair Corralation between Yokohama Rubber and Scientific Games

Assuming the 90 days trading horizon The Yokohama Rubber is expected to under-perform the Scientific Games. But the stock apears to be less risky and, when comparing its historical volatility, The Yokohama Rubber is 1.54 times less risky than Scientific Games. The stock trades about 0.0 of its potential returns per unit of risk. The Scientific Games is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,150  in Scientific Games on September 26, 2024 and sell it today you would lose (50.00) from holding Scientific Games or give up 0.61% of portfolio value over 90 days.

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

The Yokohama Rubber  vs.  Scientific Games

Yokohama Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Yokohama Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Yokohama Rubber is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Scientific Games

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Yokohama Rubber and Scientific Games

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

The idea behind The Yokohama Rubber and Scientific Games 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.