Correlation Between ScanSource and Sherwin Williams

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

By analyzing existing cross correlation between ScanSource and The Sherwin Williams, you can compare the effects of market volatilities on ScanSource and Sherwin Williams 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 Sherwin Williams. Check out your portfolio center. Please also check ongoing floating volatility patterns of ScanSource and Sherwin Williams.

Diversification Opportunities for ScanSource and Sherwin Williams

0.04

Correlation Coefficient

ScanSource  Sherwin Williams

Significant diversification

The 3 months correlation between ScanSource and Sherwin is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and The Sherwin Williams in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sherwin Williams 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 Sherwin Williams. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sherwin Williams has no effect on the direction of ScanSource i.e., ScanSource and Sherwin Williams go up and down completely randomly.

Pair Corralation between ScanSource and Sherwin Williams

Assuming the 90 days horizon ScanSource is expected to under-perform the Sherwin Williams. In addition to that, ScanSource is 1.52 times more volatile than The Sherwin Williams. It trades about -0.21 of its total potential returns per unit of risk. The Sherwin Williams is currently generating about -0.05 per unit of volatility. If you would invest  32,861  in The Sherwin Williams on December 24, 2024 and sell it today you would lose (1,906) from holding The Sherwin Williams or give up 5.8% of portfolio value over 90 days.

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

ScanSource  vs.  The Sherwin Williams

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.

Sherwin Williams

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Sherwin Williams has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sherwin Williams is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ScanSource and Sherwin Williams

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

The idea behind ScanSource and The Sherwin Williams 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.