Correlation Between Ring Energy and ScanSource

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

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

Diversification Opportunities for Ring Energy and ScanSource

0.25

Correlation Coefficient

Ring Energy  ScanSource

Modest diversification

The 3 months correlation between Ring and ScanSource is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ring Energy and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and Ring Energy 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 Ring Energy 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 Ring Energy i.e., Ring Energy and ScanSource go up and down completely randomly.

Pair Corralation between Ring Energy and ScanSource

Assuming the 90 days trading horizon Ring Energy is expected to under-perform the ScanSource. In addition to that, Ring Energy is 2.08 times more volatile than ScanSource. It trades about -0.04 of its total potential returns per unit of risk. ScanSource is currently generating about 0.04 per unit of volatility. If you would invest  3,200  in ScanSource on May 8, 2025 and sell it today you would earn a total of  120.00  from holding ScanSource or generate 3.75% return on investment over 90 days.

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

Ring Energy  vs.  ScanSource

Ring Energy

Risk-Adjusted Performance

Weakest

Over the last 90 days Ring Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 Ring Energy and ScanSource

The main advantage of trading using opposite Ring Energy and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ring Energy 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 Ring Energy 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.