Correlation Between Avanos Medical and ScanSource

Can any of the company-specific risk be diversified away by investing in both Avanos Medical 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 Avanos Medical and ScanSource into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Avanos Medical and ScanSource, you can compare the effects of market volatilities on Avanos Medical 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 Avanos Medical with a short position of ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avanos Medical and ScanSource.

Diversification Opportunities for Avanos Medical and ScanSource

-0.57

Correlation Coefficient

Avanos Medical  ScanSource

Excellent diversification

The 3 months correlation between Avanos and ScanSource is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Avanos Medical and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and Avanos Medical 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 Avanos Medical 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 Avanos Medical i.e., Avanos Medical and ScanSource go up and down completely randomly.

Pair Corralation between Avanos Medical and ScanSource

Assuming the 90 days trading horizon Avanos Medical is expected to under-perform the ScanSource. In addition to that, Avanos Medical is 1.28 times more volatile than ScanSource. It trades about -0.1 of its total potential returns per unit of risk. ScanSource is currently generating about 0.12 per unit of volatility. If you would invest  4,200  in ScanSource on September 17, 2024 and sell it today you would earn a total of  800.00  from holding ScanSource or generate 19.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Avanos Medical  vs.  ScanSource

Avanos Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avanos Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ScanSource

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ScanSource reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avanos Medical and ScanSource

The main advantage of trading using opposite Avanos Medical and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avanos Medical 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.

The idea behind Avanos Medical and ScanSource pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.