Correlation Between ScanSource and Best Buy
Can any of the company-specific risk be diversified away by investing in both ScanSource and Best Buy 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 Best Buy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ScanSource and Best Buy Co, you can compare the effects of market volatilities on ScanSource and Best Buy 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 Best Buy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ScanSource and Best Buy.
Diversification Opportunities for ScanSource and Best Buy
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between ScanSource and Best is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Best Buy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Best Buy 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 Best Buy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Best Buy has no effect on the direction of ScanSource i.e., ScanSource and Best Buy go up and down completely randomly.
Pair Corralation between ScanSource and Best Buy
Given the investment horizon of 90 days ScanSource is expected to generate 1.21 times more return on investment than Best Buy. However, ScanSource is 1.21 times more volatile than Best Buy Co. It trades about 0.1 of its potential returns per unit of risk. Best Buy Co is currently generating about 0.02 per unit of risk. If you would invest 2,778 in ScanSource on January 26, 2024 and sell it today you would earn a total of 1,509 from holding ScanSource or generate 54.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ScanSource vs. Best Buy Co
Performance |
| Timeline |
| ScanSource |
| Best Buy |
ScanSource and Best Buy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ScanSource and Best Buy
The main advantage of trading using opposite ScanSource and Best Buy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ScanSource position performs unexpectedly, Best Buy 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 Best Buy will offset losses from the drop in Best Buy's long position.The idea behind ScanSource and Best Buy Co 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.Check out your portfolio center.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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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