Correlation Between Weyerhaeuser and Scientific Games

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

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

Diversification Opportunities for Weyerhaeuser and Scientific Games

0.22

Correlation Coefficient

Weyerhaeuser  Scientific Games

Modest diversification

The 3 months correlation between Weyerhaeuser and Scientific is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Weyerhaeuser and Scientific Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Games and Weyerhaeuser 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 Weyerhaeuser 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 Weyerhaeuser i.e., Weyerhaeuser and Scientific Games go up and down completely randomly.

Pair Corralation between Weyerhaeuser and Scientific Games

Assuming the 90 days horizon Weyerhaeuser is expected to generate 5.7 times less return on investment than Scientific Games. But when comparing it to its historical volatility, Weyerhaeuser is 1.75 times less risky than Scientific Games. It trades about 0.03 of its potential returns per unit of risk. Scientific Games is currently generating about 0.11 of returns per unit of risk over similar time horizon. 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

Weyerhaeuser  vs.  Scientific Games

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.

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.

Pair Trading with Weyerhaeuser and Scientific Games

The main advantage of trading using opposite Weyerhaeuser and Scientific Games positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weyerhaeuser 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 Weyerhaeuser 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.