Correlation Between Sumitomo and SCANSOURCE (SC3SG)
Can any of the company-specific risk be diversified away by investing in both Sumitomo and SCANSOURCE (SC3SG) 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 Sumitomo and SCANSOURCE (SC3SG) into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo and SCANSOURCE, you can compare the effects of market volatilities on Sumitomo and SCANSOURCE (SC3SG) 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 Sumitomo with a short position of SCANSOURCE (SC3SG). Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo and SCANSOURCE (SC3SG).
Diversification Opportunities for Sumitomo and SCANSOURCE (SC3SG)
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sumitomo and SCANSOURCE is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo and SCANSOURCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCANSOURCE (SC3SG) and Sumitomo 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 Sumitomo are associated (or correlated) with SCANSOURCE (SC3SG). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCANSOURCE (SC3SG) has no effect on the direction of Sumitomo i.e., Sumitomo and SCANSOURCE (SC3SG) go up and down completely randomly.
Pair Corralation between Sumitomo and SCANSOURCE (SC3SG)
Assuming the 90 days trading horizon Sumitomo is expected to under-perform the SCANSOURCE (SC3SG). In addition to that, Sumitomo is 1.09 times more volatile than SCANSOURCE. It trades about -0.01 of its total potential returns per unit of risk. SCANSOURCE is currently generating about 0.06 per unit of volatility. If you would invest 3,820 in SCANSOURCE on October 22, 2024 and sell it today you would earn a total of 1,000.00 from holding SCANSOURCE or generate 26.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.56% |
| Values | Daily Returns |
Sumitomo vs. SCANSOURCE
Performance |
| Timeline |
| Sumitomo |
| SCANSOURCE (SC3SG) |
Sumitomo and SCANSOURCE (SC3SG) Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo and SCANSOURCE (SC3SG)
The main advantage of trading using opposite Sumitomo and SCANSOURCE (SC3SG) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo position performs unexpectedly, SCANSOURCE (SC3SG) 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 SCANSOURCE (SC3SG) will offset losses from the drop in SCANSOURCE (SC3SG)'s long position.| Sumitomo vs. Jacquet Metal Service | Sumitomo vs. CAREER EDUCATION | Sumitomo vs. DeVry Education Group | Sumitomo vs. GRIFFIN MINING LTD |
| SCANSOURCE (SC3SG) vs. Xenia Hotels Resorts | SCANSOURCE (SC3SG) vs. Charter Communications | SCANSOURCE (SC3SG) vs. MOBILE FACTORY INC | SCANSOURCE (SC3SG) vs. T Mobile |
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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