Correlation Between ScanSource and Element Solutions
Can any of the company-specific risk be diversified away by investing in both ScanSource and Element Solutions 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 Element Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ScanSource and Element Solutions, you can compare the effects of market volatilities on ScanSource and Element Solutions 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 Element Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of ScanSource and Element Solutions.
Diversification Opportunities for ScanSource and Element Solutions
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ScanSource and Element is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions 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 Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of ScanSource i.e., ScanSource and Element Solutions go up and down completely randomly.
Pair Corralation between ScanSource and Element Solutions
Assuming the 90 days horizon ScanSource is expected to generate 1.18 times more return on investment than Element Solutions. However, ScanSource is 1.18 times more volatile than Element Solutions. It trades about 0.2 of its potential returns per unit of risk. Element Solutions is currently generating about -0.09 per unit of risk. If you would invest 4,560 in ScanSource on September 19, 2024 and sell it today you would earn a total of 380.00 from holding ScanSource or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
ScanSource vs. Element Solutions
Performance |
| Timeline |
| ScanSource |
| Element Solutions |
ScanSource and Element Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ScanSource and Element Solutions
The main advantage of trading using opposite ScanSource and Element Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ScanSource position performs unexpectedly, Element Solutions 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 Element Solutions will offset losses from the drop in Element Solutions' long position.| ScanSource vs. CPU SOFTWAREHOUSE | ScanSource vs. Iridium Communications | ScanSource vs. Entravision Communications | ScanSource vs. Spirent Communications plc |
| Element Solutions vs. Tsingtao Brewery | Element Solutions vs. China Resources Beer | Element Solutions vs. ScanSource | Element Solutions vs. BRIT AMER TOBACCO |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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