Correlation Between ECD Automotive and ScanSource

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Can any of the company-specific risk be diversified away by investing in both ECD Automotive 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 ECD Automotive and ScanSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ECD Automotive Design and ScanSource, you can compare the effects of market volatilities on ECD Automotive 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 ECD Automotive with a short position of ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of ECD Automotive and ScanSource.

Diversification Opportunities for ECD Automotive and ScanSource

-0.12
  Correlation Coefficient

Good diversification

The 3 months correlation between ECD and ScanSource is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding ECD Automotive Design and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and ECD Automotive 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 ECD Automotive Design 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 ECD Automotive i.e., ECD Automotive and ScanSource go up and down completely randomly.

Pair Corralation between ECD Automotive and ScanSource

Given the investment horizon of 90 days ECD Automotive Design is expected to under-perform the ScanSource. In addition to that, ECD Automotive is 5.06 times more volatile than ScanSource. It trades about -0.08 of its total potential returns per unit of risk. ScanSource is currently generating about 0.05 per unit of volatility. If you would invest  3,592  in ScanSource on May 6, 2025 and sell it today you would earn a total of  186.00  from holding ScanSource or generate 5.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ECD Automotive Design  vs.  ScanSource

 Performance 
       Timeline  
ECD Automotive Design 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days ECD Automotive Design has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
ScanSource 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in ScanSource are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ScanSource is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

ECD Automotive and ScanSource Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ECD Automotive and ScanSource

The main advantage of trading using opposite ECD Automotive and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ECD Automotive 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 ECD Automotive Design 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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