Correlation Between Scientific Games and Townsquare Media

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

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

Diversification Opportunities for Scientific Games and Townsquare Media

0.47

Correlation Coefficient

Scientific Games  Townsquare Media

Very weak diversification

The 3 months correlation between Scientific and Townsquare is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Scientific Games and Townsquare Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Townsquare Media 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 Townsquare Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Townsquare Media has no effect on the direction of Scientific Games i.e., Scientific Games and Townsquare Media go up and down completely randomly.

Pair Corralation between Scientific Games and Townsquare Media

Assuming the 90 days horizon Scientific Games is expected to generate 1.18 times less return on investment than Townsquare Media. But when comparing it to its historical volatility, Scientific Games is 1.22 times less risky than Townsquare Media. It trades about 0.05 of its potential returns per unit of risk. Townsquare Media is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  590.00  in Townsquare Media on October 4, 2024 and sell it today you would earn a total of  290.00  from holding Townsquare Media or generate 49.15% return on investment over 90 days.

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

Scientific Games  vs.  Townsquare Media

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.

Townsquare Media

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Scientific Games and Townsquare Media

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

The idea behind Scientific Games and Townsquare Media 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.