Correlation Between Unum and ScanSource

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

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

Diversification Opportunities for Unum and ScanSource

0.43

Correlation Coefficient

Unum  ScanSource

Very weak diversification

The 3 months correlation between Unum and ScanSource is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Unum Group and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and Unum 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 Unum Group 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 Unum i.e., Unum and ScanSource go up and down completely randomly.

Pair Corralation between Unum and ScanSource

Given the investment horizon of 90 days Unum is expected to generate 4.97 times less return on investment than ScanSource. But when comparing it to its historical volatility, Unum Group is 2.5 times less risky than ScanSource. It trades about 0.02 of its potential returns per unit of risk. ScanSource is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,249  in ScanSource on October 11, 2024 and sell it today you would earn a total of  1,537  from holding ScanSource or generate 47.31% return on investment over 90 days.

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

Unum Group  vs.  ScanSource

Unum Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unum Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Unum is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

ScanSource

Risk-Adjusted Performance

0 of 100

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 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 Unum and ScanSource

The main advantage of trading using opposite Unum and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unum 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 Unum Group 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 CEOs Directory module to screen CEOs from public companies around the world.