Correlation Between ScanSource and Sprouts Farmers
Can any of the company-specific risk be diversified away by investing in both ScanSource and Sprouts Farmers 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 Sprouts Farmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ScanSource and Sprouts Farmers Market, you can compare the effects of market volatilities on ScanSource and Sprouts Farmers 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 Sprouts Farmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of ScanSource and Sprouts Farmers.
Diversification Opportunities for ScanSource and Sprouts Farmers
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ScanSource and Sprouts is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource and Sprouts Farmers Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprouts Farmers Market 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 Sprouts Farmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprouts Farmers Market has no effect on the direction of ScanSource i.e., ScanSource and Sprouts Farmers go up and down completely randomly.
Pair Corralation between ScanSource and Sprouts Farmers
Given the investment horizon of 90 days ScanSource is expected to generate 2.76 times less return on investment than Sprouts Farmers. But when comparing it to its historical volatility, ScanSource is 1.1 times less risky than Sprouts Farmers. It trades about 0.03 of its potential returns per unit of risk. Sprouts Farmers Market is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,050 in Sprouts Farmers Market on January 16, 2024 and sell it today you would earn a total of 3,182 from holding Sprouts Farmers Market or generate 104.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ScanSource vs. Sprouts Farmers Market
Performance |
| Timeline |
| ScanSource |
| Sprouts Farmers Market |
ScanSource and Sprouts Farmers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ScanSource and Sprouts Farmers
The main advantage of trading using opposite ScanSource and Sprouts Farmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ScanSource position performs unexpectedly, Sprouts Farmers 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 Sprouts Farmers will offset losses from the drop in Sprouts Farmers' long position.| ScanSource vs. Climb Global Solutions | ScanSource vs. Insight Enterprises | ScanSource vs. Snap One Holdings | ScanSource vs. Synnex |
| Sprouts Farmers vs. Sendas Distribuidora SA | Sprouts Farmers vs. Natural Grocers by | Sprouts Farmers vs. Albertsons Companies | Sprouts Farmers vs. Ingles Markets Incorporated |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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