Correlation Between ScanSource and Electrovaya Common

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

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

Diversification Opportunities for ScanSource and Electrovaya Common

0.7

Correlation Coefficient

ScanSource  Electrovaya Common

Poor diversification

The 3 months correlation between ScanSource and Electrovaya is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Electrovaya Common Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electrovaya Common Shares 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 Electrovaya Common. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electrovaya Common Shares has no effect on the direction of ScanSource i.e., ScanSource and Electrovaya Common go up and down completely randomly.

Pair Corralation between ScanSource and Electrovaya Common

Given the investment horizon of 90 days ScanSource is expected to generate 1.18 times less return on investment than Electrovaya Common. But when comparing it to its historical volatility, ScanSource is 1.82 times less risky than Electrovaya Common. It trades about 0.01 of its potential returns per unit of risk. Electrovaya Common Shares is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  227.00  in Electrovaya Common Shares on September 22, 2024 and sell it today you would lose (9.00) from holding Electrovaya Common Shares or give up 3.96% of portfolio value over 90 days.

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

ScanSource  vs.  Electrovaya Common Shares

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.

Electrovaya Common Shares

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ScanSource and Electrovaya Common

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

The idea behind ScanSource and Electrovaya Common Shares 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.