Correlation Between INSURANCE AUST and ScanSource

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

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

Diversification Opportunities for INSURANCE AUST and ScanSource

0.81

Correlation Coefficient

INSURANCE AUST  ScanSource

Very poor diversification

The 3 months correlation between INSURANCE and ScanSource is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding INSURANCE AUST GRP and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and INSURANCE AUST 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 INSURANCE AUST GRP 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 INSURANCE AUST i.e., INSURANCE AUST and ScanSource go up and down completely randomly.

Pair Corralation between INSURANCE AUST and ScanSource

Assuming the 90 days trading horizon INSURANCE AUST is expected to generate 1.14 times less return on investment than ScanSource. But when comparing it to its historical volatility, INSURANCE AUST GRP is 1.62 times less risky than ScanSource. It trades about 0.17 of its potential returns per unit of risk. ScanSource is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,120  in ScanSource on October 26, 2024 and sell it today you would earn a total of  740.00  from holding ScanSource or generate 17.96% return on investment over 90 days.

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

INSURANCE AUST GRP  vs.  ScanSource

INSURANCE AUST GRP

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INSURANCE AUST GRP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, INSURANCE AUST exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 INSURANCE AUST and ScanSource

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

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.