Correlation Between TFS FINANCIAL and Scientific Games

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

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

Diversification Opportunities for TFS FINANCIAL and Scientific Games

0.65

Correlation Coefficient

TFS FINANCIAL  Scientific Games

Poor diversification

The 3 months correlation between TFS and Scientific is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and Scientific Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Games 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 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 TFS FINANCIAL i.e., TFS FINANCIAL and Scientific Games go up and down completely randomly.

Pair Corralation between TFS FINANCIAL and Scientific Games

Assuming the 90 days trading horizon TFS FINANCIAL is expected to generate 0.74 times more return on investment than Scientific Games. However, TFS FINANCIAL is 1.35 times less risky than Scientific Games. It trades about -0.27 of its potential returns per unit of risk. Scientific Games is currently generating about -0.37 per unit of risk. If you would invest  1,270  in TFS FINANCIAL on October 7, 2024 and sell it today you would lose (70.00) from holding TFS FINANCIAL or give up 5.51% of portfolio value over 90 days.

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

TFS FINANCIAL  vs.  Scientific Games

TFS FINANCIAL

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TFS FINANCIAL are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TFS FINANCIAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TFS FINANCIAL and Scientific Games

The main advantage of trading using opposite TFS FINANCIAL and Scientific Games positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFS FINANCIAL 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 TFS FINANCIAL 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 Global Correlations module to find global opportunities by holding instruments from different markets.