Correlation Between Rocky Brands and ScanSource

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

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

Diversification Opportunities for Rocky Brands and ScanSource

0.32

Correlation Coefficient

Rocky Brands  ScanSource

Weak diversification

The 3 months correlation between Rocky and ScanSource is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Rocky Brands and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and Rocky Brands 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 Rocky Brands 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 Rocky Brands i.e., Rocky Brands and ScanSource go up and down completely randomly.

Pair Corralation between Rocky Brands and ScanSource

Given the investment horizon of 90 days Rocky Brands is expected to generate 2.94 times more return on investment than ScanSource. However, Rocky Brands is 2.94 times more volatile than ScanSource. It trades about 0.24 of its potential returns per unit of risk. ScanSource is currently generating about 0.33 per unit of risk. If you would invest  2,618  in Rocky Brands on February 10, 2024 and sell it today you would earn a total of  935.00  from holding Rocky Brands or generate 35.71% return on investment over 90 days.

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

Rocky Brands  vs.  ScanSource

Rocky Brands

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rocky Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward-looking signals, Rocky Brands showed solid returns over the last few months and may actually be approaching a breakup point.

ScanSource

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ScanSource exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rocky Brands and ScanSource

The main advantage of trading using opposite Rocky Brands and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rocky Brands 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 Rocky Brands 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.