Correlation Between ScanSource and Arhaus

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

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

Diversification Opportunities for ScanSource and Arhaus

0.7

Correlation Coefficient

ScanSource  Arhaus

Poor diversification

The 3 months correlation between ScanSource and Arhaus is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Arhaus Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arhaus Inc 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 Arhaus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arhaus Inc has no effect on the direction of ScanSource i.e., ScanSource and Arhaus go up and down completely randomly.

Pair Corralation between ScanSource and Arhaus

Given the investment horizon of 90 days ScanSource is expected to generate 0.6 times more return on investment than Arhaus. However, ScanSource is 1.67 times less risky than Arhaus. It trades about 0.05 of its potential returns per unit of risk. Arhaus Inc is currently generating about 0.0 per unit of risk. If you would invest  3,249  in ScanSource on October 11, 2024 and sell it today you would earn a total of  1,537  from holding ScanSource or generate 47.31% return on investment over 90 days.

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

ScanSource  vs.  Arhaus Inc

ScanSource

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days ScanSource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ScanSource is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Arhaus Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arhaus Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with ScanSource and Arhaus

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

The idea behind ScanSource and Arhaus Inc 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.