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
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ScanSource and Best is 0.68. 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 under-perform the Best Buy. But the stock apears to be less risky and, when comparing its historical volatility, ScanSource is 1.24 times less risky than Best Buy. The stock trades about -0.11 of its potential returns per unit of risk. The Best Buy Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 7,620 in Best Buy Co on January 17, 2024 and sell it today you would earn a total of 9.00 from holding Best Buy Co or generate 0.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| 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.| ScanSource vs. Climb Global Solutions | ScanSource vs. Insight Enterprises | ScanSource vs. Snap One Holdings | ScanSource vs. Synnex |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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