Correlation Between ScanSource and IB Acquisition

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

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

Diversification Opportunities for ScanSource and IB Acquisition

0.42

Correlation Coefficient

ScanSource  IB Acquisition

Very weak diversification

The 3 months correlation between ScanSource and IBAC is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and IB Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IB Acquisition Corp 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 IB Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IB Acquisition Corp has no effect on the direction of ScanSource i.e., ScanSource and IB Acquisition go up and down completely randomly.

Pair Corralation between ScanSource and IB Acquisition

Given the investment horizon of 90 days ScanSource is expected to generate 11.86 times more return on investment than IB Acquisition. However, ScanSource is 11.86 times more volatile than IB Acquisition Corp. It trades about 0.21 of its potential returns per unit of risk. IB Acquisition Corp is currently generating about 0.13 per unit of risk. If you would invest  4,889  in ScanSource on September 16, 2024 and sell it today you would earn a total of  364.00  from holding ScanSource or generate 7.45% return on investment over 90 days.

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

ScanSource  vs.  IB Acquisition Corp

ScanSource

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ScanSource may actually be approaching a critical reversion point that can send shares even higher in January 2025.

IB Acquisition Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IB Acquisition Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IB Acquisition is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ScanSource and IB Acquisition

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

The idea behind ScanSource and IB Acquisition Corp 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.