Correlation Between EDISON INTL and Scientific Games

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

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

Diversification Opportunities for EDISON INTL and Scientific Games

0.47

Correlation Coefficient

EDISON INTL  Scientific Games

Very weak diversification

The 3 months correlation between EDISON and Scientific is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding EDISON INTL and Scientific Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Games and EDISON INTL 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 EDISON INTL 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 EDISON INTL i.e., EDISON INTL and Scientific Games go up and down completely randomly.

Pair Corralation between EDISON INTL and Scientific Games

Assuming the 90 days trading horizon EDISON INTL is expected to under-perform the Scientific Games. In addition to that, EDISON INTL is 1.21 times more volatile than Scientific Games. It trades about -0.14 of its total potential returns per unit of risk. Scientific Games is currently generating about 0.02 per unit of volatility. If you would invest  8,500  in Scientific Games on October 24, 2024 and sell it today you would earn a total of  50.00  from holding Scientific Games or generate 0.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

EDISON INTL  vs.  Scientific Games

EDISON INTL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EDISON INTL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Scientific Games

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Scientific Games are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 EDISON INTL and Scientific Games

The main advantage of trading using opposite EDISON INTL and Scientific Games positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDISON INTL 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 EDISON INTL 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.