Correlation Between Scientific Games and BG Foods

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Can any of the company-specific risk be diversified away by investing in both Scientific Games and BG Foods 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 BG Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scientific Games and BG Foods, you can compare the effects of market volatilities on Scientific Games and BG Foods 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 BG Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scientific Games and BG Foods.

Diversification Opportunities for Scientific Games and BG Foods

-0.34
  Correlation Coefficient

Very good diversification

The 3 months correlation between Scientific and DHR is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Scientific Games and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods 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 BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of Scientific Games i.e., Scientific Games and BG Foods go up and down completely randomly.

Pair Corralation between Scientific Games and BG Foods

Assuming the 90 days horizon Scientific Games is expected to generate 0.7 times more return on investment than BG Foods. However, Scientific Games is 1.43 times less risky than BG Foods. It trades about 0.04 of its potential returns per unit of risk. BG Foods is currently generating about -0.02 per unit of risk. If you would invest  6,000  in Scientific Games on October 24, 2024 and sell it today you would earn a total of  2,550  from holding Scientific Games or generate 42.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Scientific Games  vs.  BG Foods

 Performance 
       Timeline  
Scientific Games 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
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.
BG Foods 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days BG Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Scientific Games and BG Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Scientific Games and BG Foods

The main advantage of trading using opposite Scientific Games and BG Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scientific Games position performs unexpectedly, BG Foods 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 BG Foods will offset losses from the drop in BG Foods' long position.
The idea behind Scientific Games and BG Foods 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.
Check out your portfolio center.
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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