Correlation Between ScanSource and Network CN

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

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

Diversification Opportunities for ScanSource and Network CN

-0.61

Correlation Coefficient

ScanSource  Network CN

Excellent diversification

The 3 months correlation between ScanSource and Network is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Network CN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network CN 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 Network CN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network CN has no effect on the direction of ScanSource i.e., ScanSource and Network CN go up and down completely randomly.

Pair Corralation between ScanSource and Network CN

Given the investment horizon of 90 days ScanSource is expected to under-perform the Network CN. But the stock apears to be less risky and, when comparing its historical volatility, ScanSource is 23.81 times less risky than Network CN. The stock trades about -0.2 of its potential returns per unit of risk. The Network CN is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  4.21  in Network CN on December 29, 2024 and sell it today you would earn a total of  21.79  from holding Network CN or generate 517.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

ScanSource  vs.  Network CN

ScanSource

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Network CN

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Network CN are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Network CN displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ScanSource and Network CN

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

The idea behind ScanSource and Network CN 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.