Correlation Between Bank of America and ScanSource

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

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

Diversification Opportunities for Bank of America and ScanSource

0.14

Correlation Coefficient

Bank of America  ScanSource

Average diversification

The 3 months correlation between Bank and ScanSource is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and Bank of America 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 Verizon Communications 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 Bank of America i.e., Bank of America and ScanSource go up and down completely randomly.

Pair Corralation between Bank of America and ScanSource

Assuming the 90 days trading horizon Verizon Communications is expected to under-perform the ScanSource. But the stock apears to be less risky and, when comparing its historical volatility, Verizon Communications is 1.63 times less risky than ScanSource. The stock trades about -0.05 of its potential returns per unit of risk. The ScanSource is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,560  in ScanSource on May 17, 2025 and sell it today you would earn a total of  120.00  from holding ScanSource or generate 3.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Verizon Communications  vs.  ScanSource

Verizon Communications

Risk-Adjusted Performance

Weakest

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Bank of America is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

ScanSource

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ScanSource is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank of America and ScanSource

The main advantage of trading using opposite Bank of America and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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 Verizon Communications 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.