Correlation Between SCANSOURCE and CHINA SOUTHN

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Can any of the company-specific risk be diversified away by investing in both SCANSOURCE and CHINA SOUTHN 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 CHINA SOUTHN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SCANSOURCE and CHINA SOUTHN AIR H , you can compare the effects of market volatilities on SCANSOURCE and CHINA SOUTHN 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 CHINA SOUTHN. Check out your portfolio center. Please also check ongoing floating volatility patterns of SCANSOURCE and CHINA SOUTHN.

Diversification Opportunities for SCANSOURCE and CHINA SOUTHN

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between SCANSOURCE and CHINA is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding SCANSOURCE and CHINA SOUTHN AIR H in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA SOUTHN AIR 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 CHINA SOUTHN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA SOUTHN AIR has no effect on the direction of SCANSOURCE i.e., SCANSOURCE and CHINA SOUTHN go up and down completely randomly.

Pair Corralation between SCANSOURCE and CHINA SOUTHN

Assuming the 90 days trading horizon SCANSOURCE is expected to generate 0.7 times more return on investment than CHINA SOUTHN. However, SCANSOURCE is 1.42 times less risky than CHINA SOUTHN. It trades about 0.06 of its potential returns per unit of risk. CHINA SOUTHN AIR H is currently generating about 0.0 per unit of risk. If you would invest  2,820  in SCANSOURCE on September 29, 2024 and sell it today you would earn a total of  1,840  from holding SCANSOURCE or generate 65.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

SCANSOURCE  vs.  CHINA SOUTHN AIR H

 Performance 
       Timeline  
SCANSOURCE 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in SCANSOURCE are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SCANSOURCE may actually be approaching a critical reversion point that can send shares even higher in January 2025.
CHINA SOUTHN AIR 

Risk-Adjusted Performance

8 of 100

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

SCANSOURCE and CHINA SOUTHN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with SCANSOURCE and CHINA SOUTHN

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

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