Correlation Between ScanSource and PC Connection

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

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

Diversification Opportunities for ScanSource and PC Connection

0.57

Correlation Coefficient

ScanSource  PC Connection

Very weak diversification

The 3 months correlation between ScanSource and CNXN is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and PC Connection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PC Connection 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 PC Connection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PC Connection has no effect on the direction of ScanSource i.e., ScanSource and PC Connection go up and down completely randomly.

Pair Corralation between ScanSource and PC Connection

Given the investment horizon of 90 days ScanSource is expected to generate 1.67 times less return on investment than PC Connection. In addition to that, ScanSource is 1.13 times more volatile than PC Connection. It trades about 0.01 of its total potential returns per unit of risk. PC Connection is currently generating about 0.01 per unit of volatility. If you would invest  7,298  in PC Connection on August 30, 2024 and sell it today you would earn a total of  7.00  from holding PC Connection or generate 0.1% return on investment over 90 days.

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

ScanSource  vs.  PC Connection

ScanSource

Risk-Adjusted Performance

0 of 100

Very 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.

PC Connection

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days PC Connection has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, PC Connection is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with ScanSource and PC Connection

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

The idea behind ScanSource and PC Connection 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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.