Correlation Between North American and ScanSource
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and ScanSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and ScanSource, you can compare the effects of market volatilities on North American 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 North American with a short position of ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and ScanSource.
Diversification Opportunities for North American and ScanSource
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between North and ScanSource is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and North American 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 North American Construction 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 North American i.e., North American and ScanSource go up and down completely randomly.
Pair Corralation between North American and ScanSource
Assuming the 90 days horizon North American Construction is expected to under-perform the ScanSource. But the stock apears to be less risky and, when comparing its historical volatility, North American Construction is 1.02 times less risky than ScanSource. The stock trades about 0.0 of its potential returns per unit of risk. The ScanSource is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,620 in ScanSource on September 12, 2024 and sell it today you would earn a total of 2,260 from holding ScanSource or generate 86.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. ScanSource
Performance |
| Timeline |
| North American Const |
| ScanSource |
North American and ScanSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and ScanSource
The main advantage of trading using opposite North American and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. Tenaris SA | North American vs. NOV Inc | North American vs. Superior Plus Corp | North American vs. SIVERS SEMICONDUCTORS AB |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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