Correlation Between CN MODERN and SCANSOURCE
Can any of the company-specific risk be diversified away by investing in both CN MODERN and SCANSOURCE 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 CN MODERN and SCANSOURCE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CN MODERN DAIRY and SCANSOURCE, you can compare the effects of market volatilities on CN MODERN and SCANSOURCE 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 CN MODERN with a short position of SCANSOURCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and SCANSOURCE.
Diversification Opportunities for CN MODERN and SCANSOURCE
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between 07M and SCANSOURCE is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and SCANSOURCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCANSOURCE and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with SCANSOURCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCANSOURCE has no effect on the direction of CN MODERN i.e., CN MODERN and SCANSOURCE go up and down completely randomly.
Pair Corralation between CN MODERN and SCANSOURCE
Assuming the 90 days trading horizon CN MODERN is expected to generate 1.64 times less return on investment than SCANSOURCE. In addition to that, CN MODERN is 1.24 times more volatile than SCANSOURCE. It trades about 0.03 of its total potential returns per unit of risk. SCANSOURCE is currently generating about 0.06 per unit of volatility. If you would invest 2,780 in SCANSOURCE on September 25, 2024 and sell it today you would earn a total of 1,800 from holding SCANSOURCE or generate 64.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CN MODERN DAIRY vs. SCANSOURCE
Performance |
| Timeline |
| CN MODERN DAIRY |
| SCANSOURCE |
CN MODERN and SCANSOURCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CN MODERN and SCANSOURCE
The main advantage of trading using opposite CN MODERN and SCANSOURCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CN MODERN position performs unexpectedly, SCANSOURCE 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 SCANSOURCE will offset losses from the drop in SCANSOURCE's long position.The idea behind CN MODERN DAIRY and SCANSOURCE 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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