Correlation Between GAMESTOP and Scientific Games
Can any of the company-specific risk be diversified away by investing in both GAMESTOP 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 GAMESTOP and Scientific Games into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GAMESTOP and Scientific Games, you can compare the effects of market volatilities on GAMESTOP 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 GAMESTOP with a short position of Scientific Games. Check out your portfolio center. Please also check ongoing floating volatility patterns of GAMESTOP and Scientific Games.
Diversification Opportunities for GAMESTOP and Scientific Games
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GAMESTOP and Scientific is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding GAMESTOP and Scientific Games in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scientific Games and GAMESTOP 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 GAMESTOP 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 GAMESTOP i.e., GAMESTOP and Scientific Games go up and down completely randomly.
Pair Corralation between GAMESTOP and Scientific Games
Assuming the 90 days trading horizon GAMESTOP is expected to generate 1.38 times more return on investment than Scientific Games. However, GAMESTOP is 1.38 times more volatile than Scientific Games. It trades about 0.28 of its potential returns per unit of risk. Scientific Games is currently generating about 0.11 per unit of risk. If you would invest 2,047 in GAMESTOP on September 4, 2024 and sell it today you would earn a total of 553.00 from holding GAMESTOP or generate 27.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
GAMESTOP vs. Scientific Games
Performance |
| Timeline |
| GAMESTOP |
| Scientific Games |
GAMESTOP and Scientific Games Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GAMESTOP and Scientific Games
The main advantage of trading using opposite GAMESTOP and Scientific Games positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GAMESTOP 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 GAMESTOP 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.| Scientific Games vs. Apple Inc | Scientific Games vs. Apple Inc | Scientific Games vs. Apple Inc | Scientific Games vs. Apple Inc |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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