Correlation Between Scientific Games and Weyerhaeuser

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

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

Diversification Opportunities for Scientific Games and Weyerhaeuser

0.22

Correlation Coefficient

Scientific Games  Weyerhaeuser

Modest diversification

The 3 months correlation between Scientific and Weyerhaeuser is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Scientific Games and Weyerhaeuser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weyerhaeuser 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 Weyerhaeuser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weyerhaeuser has no effect on the direction of Scientific Games i.e., Scientific Games and Weyerhaeuser go up and down completely randomly.

Pair Corralation between Scientific Games and Weyerhaeuser

Assuming the 90 days horizon Scientific Games is expected to generate 1.75 times more return on investment than Weyerhaeuser. However, Scientific Games is 1.75 times more volatile than Weyerhaeuser. It trades about 0.11 of its potential returns per unit of risk. Weyerhaeuser is currently generating about 0.03 per unit of risk. If you would invest  8,250  in Scientific Games on December 24, 2024 and sell it today you would earn a total of  1,250  from holding Scientific Games or generate 15.15% return on investment over 90 days.

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

Scientific Games  vs.  Weyerhaeuser

Scientific Games

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scientific Games are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Scientific Games reported solid returns over the last few months and may actually be approaching a breakup point.

Weyerhaeuser

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Weyerhaeuser are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Weyerhaeuser 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 Weyerhaeuser

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

The idea behind Scientific Games and Weyerhaeuser 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.