Correlation Between ScanSource and American Clean

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

By analyzing existing cross correlation between ScanSource and American Clean Resources, you can compare the effects of market volatilities on ScanSource and American Clean 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 American Clean. Check out your portfolio center. Please also check ongoing floating volatility patterns of ScanSource and American Clean.

Diversification Opportunities for ScanSource and American Clean

0.25

Correlation Coefficient

ScanSource  American Clean

Modest diversification

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

Pair Corralation between ScanSource and American Clean

Given the investment horizon of 90 days ScanSource is expected to generate 1.08 times less return on investment than American Clean. But when comparing it to its historical volatility, ScanSource is 2.0 times less risky than American Clean. It trades about 0.12 of its potential returns per unit of risk. American Clean Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  850.00  in American Clean Resources on February 10, 2024 and sell it today you would earn a total of  100.00  from holding American Clean Resources or generate 11.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

ScanSource  vs.  American Clean Resources

ScanSource

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 9 (%) 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.

American Clean Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Clean Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Clean reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ScanSource and American Clean

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

The idea behind ScanSource and American Clean Resources 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.