Correlation Between Retail Estates and Scientific Games

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

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

Diversification Opportunities for Retail Estates and Scientific Games

0.14

Correlation Coefficient

Retail Estates  Scientific Games

Average diversification

The 3 months correlation between Retail and Scientific is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Retail Estates NV and Scientific Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Games and Retail Estates 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 Retail Estates NV 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 Retail Estates i.e., Retail Estates and Scientific Games go up and down completely randomly.

Pair Corralation between Retail Estates and Scientific Games

Assuming the 90 days horizon Retail Estates NV is expected to under-perform the Scientific Games. But the stock apears to be less risky and, when comparing its historical volatility, Retail Estates NV is 2.57 times less risky than Scientific Games. The stock trades about -0.13 of its potential returns per unit of risk. The Scientific Games is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  9,800  in Scientific Games on September 2, 2024 and sell it today you would lose (700.00) from holding Scientific Games or give up 7.14% of portfolio value over 90 days.

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

Retail Estates NV  vs.  Scientific Games

Retail Estates NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 Retail Estates and Scientific Games

The main advantage of trading using opposite Retail Estates and Scientific Games positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Retail Estates 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 Retail Estates NV 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.