Correlation Between CDK Global and ScanSource

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

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

Diversification Opportunities for CDK Global and ScanSource

0.33

Correlation Coefficient

CDK Global  ScanSource

Weak diversification

The 3 months correlation between CDK and ScanSource is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding CDK Global Holdings and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and CDK Global 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 CDK Global Holdings 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 CDK Global i.e., CDK Global and ScanSource go up and down completely randomly.

Pair Corralation between CDK Global and ScanSource

If you would invest  4,153  in ScanSource on February 19, 2024 and sell it today you would earn a total of  780.00  from holding ScanSource or generate 18.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

CDK Global Holdings  vs.  ScanSource

CDK Global Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CDK Global Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, CDK Global is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

ScanSource

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 12 (%) 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 CDK Global and ScanSource

The main advantage of trading using opposite CDK Global and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDK Global 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 CDK Global Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.