Correlation Between Southern California and ScanSource

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

By analyzing existing cross correlation between Southern California Gas and ScanSource, you can compare the effects of market volatilities on Southern California and ScanSource 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 Southern California with a short position of ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern California and ScanSource.

Diversification Opportunities for Southern California and ScanSource

-0.25

Correlation Coefficient

Southern California  ScanSource

Very good diversification

The 3 months correlation between Southern and ScanSource is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Southern California Gas and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and Southern California 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 Southern California Gas are associated (or correlated) with ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of Southern California i.e., Southern California and ScanSource go up and down completely randomly.

Pair Corralation between Southern California and ScanSource

If you would invest  2,515  in Southern California Gas on October 11, 2024 and sell it today you would earn a total of  0.00  from holding Southern California Gas or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	10.0%
Values	Daily Returns

Southern California Gas  vs.  ScanSource

Southern California Gas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern California Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

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.

Pair Trading with Southern California and ScanSource

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

The idea behind Southern California Gas and ScanSource 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 Commodity Directory module to find actively traded commodities issued by global exchanges.