Correlation Between RETAIL FOOD and SCANSOURCE (SC3SG)

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

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

Diversification Opportunities for RETAIL FOOD and SCANSOURCE (SC3SG)

0.47

Correlation Coefficient

RETAIL FOOD  SCANSOURCE (SC3SG)

Very weak diversification

The 3 months correlation between RETAIL and SCANSOURCE is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and SCANSOURCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCANSOURCE (SC3SG) and RETAIL FOOD 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 RETAIL FOOD GROUP 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 RETAIL FOOD i.e., RETAIL FOOD and SCANSOURCE (SC3SG) go up and down completely randomly.

Pair Corralation between RETAIL FOOD and SCANSOURCE (SC3SG)

Assuming the 90 days trading horizon RETAIL FOOD GROUP is expected to under-perform the SCANSOURCE (SC3SG). In addition to that, RETAIL FOOD is 1.84 times more volatile than SCANSOURCE. It trades about -0.23 of its total potential returns per unit of risk. SCANSOURCE is currently generating about -0.18 per unit of volatility. If you would invest  4,880  in SCANSOURCE on October 11, 2024 and sell it today you would lose (280.00) from holding SCANSOURCE or give up 5.74% of portfolio value over 90 days.

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

RETAIL FOOD GROUP  vs.  SCANSOURCE

RETAIL FOOD GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RETAIL FOOD GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

SCANSOURCE (SC3SG)

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SCANSOURCE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, SCANSOURCE (SC3SG) may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with RETAIL FOOD and SCANSOURCE (SC3SG)

The main advantage of trading using opposite RETAIL FOOD and SCANSOURCE (SC3SG) positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RETAIL FOOD 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 RETAIL FOOD GROUP 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.