Correlation Between ScanSource and Peloton Interactive
Can any of the company-specific risk be diversified away by investing in both ScanSource and Peloton Interactive 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 ScanSource and Peloton Interactive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ScanSource and Peloton Interactive, you can compare the effects of market volatilities on ScanSource and Peloton Interactive 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 ScanSource with a short position of Peloton Interactive. Check out your portfolio center. Please also check ongoing floating volatility patterns of ScanSource and Peloton Interactive.
Diversification Opportunities for ScanSource and Peloton Interactive
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ScanSource and Peloton is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Peloton Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peloton Interactive and ScanSource 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 ScanSource are associated (or correlated) with Peloton Interactive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peloton Interactive has no effect on the direction of ScanSource i.e., ScanSource and Peloton Interactive go up and down completely randomly.
Pair Corralation between ScanSource and Peloton Interactive
Assuming the 90 days horizon ScanSource is expected to generate 5.88 times less return on investment than Peloton Interactive. But when comparing it to its historical volatility, ScanSource is 2.78 times less risky than Peloton Interactive. It trades about 0.07 of its potential returns per unit of risk. Peloton Interactive is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 349.00 in Peloton Interactive on September 13, 2024 and sell it today you would earn a total of 561.00 from holding Peloton Interactive or generate 160.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ScanSource vs. Peloton Interactive
Performance |
| Timeline |
| ScanSource |
| Peloton Interactive |
ScanSource and Peloton Interactive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ScanSource and Peloton Interactive
The main advantage of trading using opposite ScanSource and Peloton Interactive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ScanSource position performs unexpectedly, Peloton Interactive 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 Peloton Interactive will offset losses from the drop in Peloton Interactive's long position.The idea behind ScanSource and Peloton Interactive 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.| Peloton Interactive vs. EAGLE MATERIALS | Peloton Interactive vs. BRIT AMER TOBACCO | Peloton Interactive vs. NEWELL RUBBERMAID | Peloton Interactive vs. Retail Estates NV |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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