Correlation Between Waste Management and ScanSource
Can any of the company-specific risk be diversified away by investing in both Waste Management and ScanSource 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 Waste Management and ScanSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Waste Management and ScanSource, you can compare the effects of market volatilities on Waste Management and ScanSource 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 Waste Management with a short position of ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Waste Management and ScanSource.
Diversification Opportunities for Waste Management and ScanSource
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Waste and ScanSource is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Waste Management and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and Waste Management 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 Waste Management are associated (or correlated) with ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of Waste Management i.e., Waste Management and ScanSource go up and down completely randomly.
Pair Corralation between Waste Management and ScanSource
Assuming the 90 days trading horizon Waste Management is expected to generate 1.17 times less return on investment than ScanSource. But when comparing it to its historical volatility, Waste Management is 2.01 times less risky than ScanSource. It trades about 0.32 of its potential returns per unit of risk. ScanSource is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 4,140 in ScanSource on August 26, 2024 and sell it today you would earn a total of 540.00 from holding ScanSource or generate 13.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Waste Management vs. ScanSource
Performance |
| Timeline |
| Waste Management |
| ScanSource |
Waste Management and ScanSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Waste Management and ScanSource
The main advantage of trading using opposite Waste Management and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Waste Management position performs unexpectedly, ScanSource 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 will offset losses from the drop in ScanSource's long position.| Waste Management vs. APPLIED MATERIALS | Waste Management vs. Vulcan Materials | Waste Management vs. Sumitomo Rubber Industries | Waste Management vs. VULCAN MATERIALS |
| ScanSource vs. MULTI CHEM LTD | ScanSource vs. HUT 8 P | ScanSource vs. AGRICUL BK CHINA H | ScanSource vs. United Natural Foods |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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