Correlation Between Japan Steel and ScanSource

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

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

Diversification Opportunities for Japan Steel and ScanSource

-0.51

Correlation Coefficient

Japan Steel  ScanSource

Excellent diversification

The 3 months correlation between Japan and ScanSource is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding The Japan Steel and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and Japan Steel 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 The Japan Steel 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 Japan Steel i.e., Japan Steel and ScanSource go up and down completely randomly.

Pair Corralation between Japan Steel and ScanSource

Assuming the 90 days horizon The Japan Steel is expected to generate 1.81 times more return on investment than ScanSource. However, Japan Steel is 1.81 times more volatile than ScanSource. It trades about 0.25 of its potential returns per unit of risk. ScanSource is currently generating about -0.01 per unit of risk. If you would invest  3,540  in The Japan Steel on May 15, 2025 and sell it today you would earn a total of  2,010  from holding The Japan Steel or generate 56.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

The Japan Steel  vs.  ScanSource

Japan Steel

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Japan Steel are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Steel reported solid returns over the last few months and may actually be approaching a breakup point.

ScanSource

Risk-Adjusted Performance

Weakest

Over the last 90 days ScanSource has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Japan Steel and ScanSource

The main advantage of trading using opposite Japan Steel and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Steel 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 The Japan Steel 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.