Correlation Between ScanSource and IMPERIAL TOBACCO
Can any of the company-specific risk be diversified away by investing in both ScanSource and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ScanSource and IMPERIAL TOBACCO , you can compare the effects of market volatilities on ScanSource and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of ScanSource and IMPERIAL TOBACCO.
Diversification Opportunities for ScanSource and IMPERIAL TOBACCO
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ScanSource and IMPERIAL is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and IMPERIAL TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMPERIAL TOBACCO has no effect on the direction of ScanSource i.e., ScanSource and IMPERIAL TOBACCO go up and down completely randomly.
Pair Corralation between ScanSource and IMPERIAL TOBACCO
Assuming the 90 days horizon ScanSource is expected to generate 1.83 times more return on investment than IMPERIAL TOBACCO. However, ScanSource is 1.83 times more volatile than IMPERIAL TOBACCO . It trades about 0.07 of its potential returns per unit of risk. IMPERIAL TOBACCO is currently generating about 0.08 per unit of risk. If you would invest 2,740 in ScanSource on September 20, 2024 and sell it today you would earn a total of 2,240 from holding ScanSource or generate 81.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ScanSource vs. IMPERIAL TOBACCO
Performance |
| Timeline |
| ScanSource |
| IMPERIAL TOBACCO |
ScanSource and IMPERIAL TOBACCO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ScanSource and IMPERIAL TOBACCO
The main advantage of trading using opposite ScanSource and IMPERIAL TOBACCO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ScanSource position performs unexpectedly, IMPERIAL TOBACCO 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 IMPERIAL TOBACCO will offset losses from the drop in IMPERIAL TOBACCO's long position.| ScanSource vs. Fukuyama Transporting Co | ScanSource vs. Gold Road Resources | ScanSource vs. TEXAS ROADHOUSE | ScanSource vs. Broadridge Financial Solutions |
| IMPERIAL TOBACCO vs. Apple Inc | IMPERIAL TOBACCO vs. Apple Inc | IMPERIAL TOBACCO vs. Apple Inc | IMPERIAL TOBACCO vs. Microsoft |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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