Correlation Between ScanSource and Shunfeng International
Can any of the company-specific risk be diversified away by investing in both ScanSource and Shunfeng International 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 Shunfeng International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ScanSource and Shunfeng International Clean, you can compare the effects of market volatilities on ScanSource and Shunfeng International 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 Shunfeng International. Check out your portfolio center. Please also check ongoing floating volatility patterns of ScanSource and Shunfeng International.
Diversification Opportunities for ScanSource and Shunfeng International
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between ScanSource and Shunfeng is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Shunfeng International Clean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shunfeng International 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 Shunfeng International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shunfeng International has no effect on the direction of ScanSource i.e., ScanSource and Shunfeng International go up and down completely randomly.
Pair Corralation between ScanSource and Shunfeng International
Assuming the 90 days horizon ScanSource is expected to generate 38.79 times less return on investment than Shunfeng International. But when comparing it to its historical volatility, ScanSource is 27.23 times less risky than Shunfeng International. It trades about 0.07 of its potential returns per unit of risk. Shunfeng International Clean is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 0.10 in Shunfeng International Clean on September 14, 2024 and sell it today you would earn a total of 0.30 from holding Shunfeng International Clean or generate 300.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ScanSource vs. Shunfeng International Clean
Performance |
| Timeline |
| ScanSource |
| Shunfeng International |
ScanSource and Shunfeng International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ScanSource and Shunfeng International
The main advantage of trading using opposite ScanSource and Shunfeng International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ScanSource position performs unexpectedly, Shunfeng International 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 Shunfeng International will offset losses from the drop in Shunfeng International's long position.The idea behind ScanSource and Shunfeng International Clean 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.| Shunfeng International vs. MOLSON RS BEVERAGE | Shunfeng International vs. Fevertree Drinks PLC | Shunfeng International vs. ScanSource | Shunfeng International vs. Safety Insurance Group |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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