Correlation Between Nextracker and ScanSource

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

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

Diversification Opportunities for Nextracker and ScanSource

-0.06

Correlation Coefficient

Nextracker  ScanSource

Good diversification

The 3 months correlation between Nextracker and ScanSource is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Nextracker Class A and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and Nextracker 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 Nextracker Class A 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 Nextracker i.e., Nextracker and ScanSource go up and down completely randomly.

Pair Corralation between Nextracker and ScanSource

Considering the 90-day investment horizon Nextracker Class A is expected to generate 1.56 times more return on investment than ScanSource. However, Nextracker is 1.56 times more volatile than ScanSource. It trades about 0.25 of its potential returns per unit of risk. ScanSource is currently generating about -0.19 per unit of risk. If you would invest  3,716  in Nextracker Class A on October 11, 2024 and sell it today you would earn a total of  538.00  from holding Nextracker Class A or generate 14.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Nextracker Class A  vs.  ScanSource

Nextracker Class A

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nextracker Class A are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Nextracker unveiled solid returns over the last few months and may actually be approaching a breakup point.

ScanSource

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days ScanSource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ScanSource is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nextracker and ScanSource

The main advantage of trading using opposite Nextracker and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextracker 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 Nextracker Class A 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.