Correlation Between ScanSource and Inchcape Plc

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

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

Diversification Opportunities for ScanSource and Inchcape Plc

0.5

Correlation Coefficient

ScanSource  Inchcape Plc

Very weak diversification

The 3 months correlation between ScanSource and Inchcape is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Inchcape plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inchcape plc and ScanSource 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 ScanSource are associated (or correlated) with Inchcape Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inchcape plc has no effect on the direction of ScanSource i.e., ScanSource and Inchcape Plc go up and down completely randomly.

Pair Corralation between ScanSource and Inchcape Plc

Assuming the 90 days horizon ScanSource is expected to under-perform the Inchcape Plc. In addition to that, ScanSource is 1.1 times more volatile than Inchcape plc. It trades about -0.21 of its total potential returns per unit of risk. Inchcape plc is currently generating about -0.07 per unit of volatility. If you would invest  943.00  in Inchcape plc on December 24, 2024 and sell it today you would lose (94.00) from holding Inchcape plc or give up 9.97% of portfolio value over 90 days.

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

ScanSource  vs.  Inchcape plc

ScanSource

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Inchcape plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inchcape plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ScanSource and Inchcape Plc

The main advantage of trading using opposite ScanSource and Inchcape Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ScanSource position performs unexpectedly, Inchcape Plc 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 Inchcape Plc will offset losses from the drop in Inchcape Plc's long position.

The idea behind ScanSource and Inchcape plc 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.