Correlation Between ScanSource and Semtech
Can any of the company-specific risk be diversified away by investing in both ScanSource and Semtech 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 Semtech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ScanSource and Semtech, you can compare the effects of market volatilities on ScanSource and Semtech 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 Semtech. Check out your portfolio center. Please also check ongoing floating volatility patterns of ScanSource and Semtech.
Diversification Opportunities for ScanSource and Semtech
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ScanSource and Semtech is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Semtech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semtech 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 Semtech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semtech has no effect on the direction of ScanSource i.e., ScanSource and Semtech go up and down completely randomly.
Pair Corralation between ScanSource and Semtech
Given the investment horizon of 90 days ScanSource is expected to generate 1.5 times less return on investment than Semtech. But when comparing it to its historical volatility, ScanSource is 1.8 times less risky than Semtech. It trades about 0.06 of its potential returns per unit of risk. Semtech is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,862 in Semtech on August 27, 2024 and sell it today you would earn a total of 2,227 from holding Semtech or generate 77.81% 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. Semtech
Performance |
| Timeline |
| ScanSource |
| Semtech |
ScanSource and Semtech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ScanSource and Semtech
The main advantage of trading using opposite ScanSource and Semtech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ScanSource position performs unexpectedly, Semtech 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 Semtech will offset losses from the drop in Semtech's long position.| ScanSource vs. Climb Global Solutions | ScanSource vs. Insight Enterprises | ScanSource vs. Synnex | ScanSource vs. PC Connection |
| Semtech vs. Power Integrations | Semtech vs. Diodes Incorporated | Semtech vs. MACOM Technology Solutions | Semtech vs. Cirrus Logic |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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