Correlation Between Alta Equipment and ScanSource
Can any of the company-specific risk be diversified away by investing in both Alta Equipment 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 Alta Equipment and ScanSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alta Equipment Group and ScanSource, you can compare the effects of market volatilities on Alta Equipment 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 Alta Equipment with a short position of ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alta Equipment and ScanSource.
Diversification Opportunities for Alta Equipment and ScanSource
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alta and ScanSource is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Alta Equipment Group and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and Alta Equipment 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 Alta Equipment Group 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 Alta Equipment i.e., Alta Equipment and ScanSource go up and down completely randomly.
Pair Corralation between Alta Equipment and ScanSource
Given the investment horizon of 90 days Alta Equipment Group is expected to generate 1.9 times more return on investment than ScanSource. However, Alta Equipment is 1.9 times more volatile than ScanSource. It trades about 0.02 of its potential returns per unit of risk. ScanSource is currently generating about 0.03 per unit of risk. If you would invest 782.00 in Alta Equipment Group on September 1, 2024 and sell it today you would earn a total of 9.00 from holding Alta Equipment Group or generate 1.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alta Equipment Group vs. ScanSource
Performance |
| Timeline |
| Alta Equipment Group |
| ScanSource |
Alta Equipment and ScanSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alta Equipment and ScanSource
The main advantage of trading using opposite Alta Equipment and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alta Equipment 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.| Alta Equipment vs. McGrath RentCorp | Alta Equipment vs. Herc Holdings | Alta Equipment vs. PROG Holdings | Alta Equipment vs. Custom Truck One |
| ScanSource vs. Climb Global Solutions | ScanSource vs. Insight Enterprises | ScanSource vs. Synnex | ScanSource vs. PC Connection |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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