Correlation Between BBB Foods and ScanSource

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

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

Diversification Opportunities for BBB Foods and ScanSource

0.78

Correlation Coefficient

BBB Foods  ScanSource

Poor diversification

The 3 months correlation between BBB and ScanSource is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and BBB Foods 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 BBB Foods 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 BBB Foods i.e., BBB Foods and ScanSource go up and down completely randomly.

Pair Corralation between BBB Foods and ScanSource

Given the investment horizon of 90 days BBB Foods is expected to generate 0.96 times more return on investment than ScanSource. However, BBB Foods is 1.04 times less risky than ScanSource. It trades about -0.13 of its potential returns per unit of risk. ScanSource is currently generating about -0.16 per unit of risk. If you would invest  2,945  in BBB Foods on December 20, 2024 and sell it today you would lose (525.00) from holding BBB Foods or give up 17.83% of portfolio value over 90 days.

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

BBB Foods  vs.  ScanSource

BBB Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days BBB Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with BBB Foods and ScanSource

The main advantage of trading using opposite BBB Foods and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods 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 BBB Foods 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.