Correlation Between Japan Steel and SCANSOURCE (SC3SG)

Can any of the company-specific risk be diversified away by investing in both Japan Steel 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 Japan Steel and SCANSOURCE (SC3SG) into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Japan Steel and SCANSOURCE, you can compare the effects of market volatilities on Japan Steel 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 Japan Steel with a short position of SCANSOURCE (SC3SG). Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Steel and SCANSOURCE (SC3SG).

Diversification Opportunities for Japan Steel and SCANSOURCE (SC3SG)

0.21

Correlation Coefficient

Japan Steel  SCANSOURCE (SC3SG)

Modest diversification

The 3 months correlation between Japan and SCANSOURCE is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding The Japan Steel and SCANSOURCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCANSOURCE (SC3SG) and Japan Steel 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 The Japan Steel 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 Japan Steel i.e., Japan Steel and SCANSOURCE (SC3SG) go up and down completely randomly.

Pair Corralation between Japan Steel and SCANSOURCE (SC3SG)

Assuming the 90 days horizon The Japan Steel is expected to generate 1.75 times more return on investment than SCANSOURCE (SC3SG). However, Japan Steel is 1.75 times more volatile than SCANSOURCE. It trades about 0.01 of its potential returns per unit of risk. SCANSOURCE is currently generating about -0.2 per unit of risk. If you would invest  3,780  in The Japan Steel on December 23, 2024 and sell it today you would lose (60.00) from holding The Japan Steel or give up 1.59% of portfolio value over 90 days.

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

The Japan Steel  vs.  SCANSOURCE

Japan Steel

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Japan Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Japan Steel is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SCANSOURCE (SC3SG)

Risk-Adjusted Performance

Very Weak

Over the last 90 days SCANSOURCE 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 April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Japan Steel and SCANSOURCE (SC3SG)

The main advantage of trading using opposite Japan Steel and SCANSOURCE (SC3SG) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Steel 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.

The idea behind The Japan Steel 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.