Correlation Between SCANSOURCE (SC3SG) and Veeva Systems

Can any of the company-specific risk be diversified away by investing in both SCANSOURCE (SC3SG) and Veeva Systems 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 (SC3SG) and Veeva Systems into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SCANSOURCE and Veeva Systems, you can compare the effects of market volatilities on SCANSOURCE (SC3SG) and Veeva Systems 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 (SC3SG) with a short position of Veeva Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCANSOURCE (SC3SG) and Veeva Systems.

Diversification Opportunities for SCANSOURCE (SC3SG) and Veeva Systems

0.75

Correlation Coefficient

SCANSOURCE (SC3SG)  Veeva Systems

Poor diversification

The 3 months correlation between SCANSOURCE and Veeva is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SCANSOURCE and Veeva Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veeva Systems and SCANSOURCE (SC3SG) 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 Veeva Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veeva Systems has no effect on the direction of SCANSOURCE (SC3SG) i.e., SCANSOURCE (SC3SG) and Veeva Systems go up and down completely randomly.

Pair Corralation between SCANSOURCE (SC3SG) and Veeva Systems

Assuming the 90 days trading horizon SCANSOURCE is expected to generate 0.84 times more return on investment than Veeva Systems. However, SCANSOURCE is 1.19 times less risky than Veeva Systems. It trades about 0.26 of its potential returns per unit of risk. Veeva Systems is currently generating about -0.13 per unit of risk. If you would invest  4,580  in SCANSOURCE on October 23, 2024 and sell it today you would earn a total of  240.00  from holding SCANSOURCE or generate 5.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.12%
Values	Daily Returns

SCANSOURCE  vs.  Veeva Systems

SCANSOURCE (SC3SG)

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 fragile basic indicators, SCANSOURCE (SC3SG) unveiled solid returns over the last few months and may actually be approaching a breakup point.

Veeva Systems

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Veeva Systems are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Veeva Systems 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 (SC3SG) and Veeva Systems

The main advantage of trading using opposite SCANSOURCE (SC3SG) and Veeva Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCANSOURCE (SC3SG) position performs unexpectedly, Veeva Systems 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 Veeva Systems will offset losses from the drop in Veeva Systems' long position.

The idea behind SCANSOURCE and Veeva Systems 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.