Correlation Between ScanSource and Icon Energy

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

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

Diversification Opportunities for ScanSource and Icon Energy

0.53

Correlation Coefficient

ScanSource  Icon Energy

Very weak diversification

The 3 months correlation between ScanSource and Icon is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Icon Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Energy 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 Icon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Energy Corp has no effect on the direction of ScanSource i.e., ScanSource and Icon Energy go up and down completely randomly.

Pair Corralation between ScanSource and Icon Energy

Given the investment horizon of 90 days ScanSource is expected to under-perform the Icon Energy. But the stock apears to be less risky and, when comparing its historical volatility, ScanSource is 1.54 times less risky than Icon Energy. The stock trades about -0.19 of its potential returns per unit of risk. The Icon Energy Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  227.00  in Icon Energy Corp on October 6, 2024 and sell it today you would lose (7.00) from holding Icon Energy Corp or give up 3.08% of portfolio value over 90 days.

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

ScanSource  vs.  Icon Energy Corp

ScanSource

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Icon Energy Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Energy Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Icon Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ScanSource and Icon Energy

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

The idea behind ScanSource and Icon Energy 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.