Correlation Between SCANSOURCE and Collins Foods

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

By analyzing existing cross correlation between SCANSOURCE and Collins Foods Limited, you can compare the effects of market volatilities on SCANSOURCE and Collins Foods 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 Collins Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCANSOURCE and Collins Foods.

Diversification Opportunities for SCANSOURCE and Collins Foods

-0.02

Correlation Coefficient

SCANSOURCE  Collins Foods

Good diversification

The 3 months correlation between SCANSOURCE and Collins is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding SCANSOURCE and Collins Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods Limited 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 Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods Limited has no effect on the direction of SCANSOURCE i.e., SCANSOURCE and Collins Foods go up and down completely randomly.

Pair Corralation between SCANSOURCE and Collins Foods

Assuming the 90 days trading horizon SCANSOURCE is expected to generate 1.22 times more return on investment than Collins Foods. However, SCANSOURCE is 1.22 times more volatile than Collins Foods Limited. It trades about 0.11 of its potential returns per unit of risk. Collins Foods Limited is currently generating about -0.02 per unit of risk. If you would invest  4,300  in SCANSOURCE on September 18, 2024 and sell it today you would earn a total of  700.00  from holding SCANSOURCE or generate 16.28% return on investment over 90 days.

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

SCANSOURCE  vs.  Collins Foods Limited

SCANSOURCE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCANSOURCE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SCANSOURCE unveiled solid returns over the last few months and may actually be approaching a breakup point.

Collins Foods Limited

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with SCANSOURCE and Collins Foods

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

The idea behind SCANSOURCE and Collins Foods Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.