Correlation Between Scientific Games and EMERSON ELECTRIC

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

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

Diversification Opportunities for Scientific Games and EMERSON ELECTRIC

0.55

Correlation Coefficient

Scientific Games  EMERSON ELECTRIC

Very weak diversification

The 3 months correlation between Scientific and EMERSON is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Scientific Games and EMERSON ELECTRIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMERSON ELECTRIC 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 EMERSON ELECTRIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMERSON ELECTRIC has no effect on the direction of Scientific Games i.e., Scientific Games and EMERSON ELECTRIC go up and down completely randomly.

Pair Corralation between Scientific Games and EMERSON ELECTRIC

Assuming the 90 days horizon Scientific Games is expected to under-perform the EMERSON ELECTRIC. In addition to that, Scientific Games is 1.58 times more volatile than EMERSON ELECTRIC. It trades about -0.41 of its total potential returns per unit of risk. EMERSON ELECTRIC is currently generating about -0.33 per unit of volatility. If you would invest  12,354  in EMERSON ELECTRIC on October 9, 2024 and sell it today you would lose (698.00) from holding EMERSON ELECTRIC or give up 5.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.12%
Values	Daily Returns

Scientific Games  vs.  EMERSON ELECTRIC

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.

EMERSON ELECTRIC

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EMERSON ELECTRIC are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, EMERSON ELECTRIC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Scientific Games and EMERSON ELECTRIC

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

The idea behind Scientific Games and EMERSON ELECTRIC 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.