Correlation Between Rio2 and ScanSource

Can any of the company-specific risk be diversified away by investing in both Rio2 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 Rio2 and ScanSource into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rio2 and ScanSource, you can compare the effects of market volatilities on Rio2 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 Rio2 with a short position of ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio2 and ScanSource.

Diversification Opportunities for Rio2 and ScanSource

-0.65

Correlation Coefficient

Rio2  ScanSource

Excellent diversification

The 3 months correlation between Rio2 and ScanSource is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Rio2 and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource and Rio2 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 Rio2 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 Rio2 i.e., Rio2 and ScanSource go up and down completely randomly.

Pair Corralation between Rio2 and ScanSource

Assuming the 90 days trading horizon Rio2 is expected to generate 1.7 times more return on investment than ScanSource. However, Rio2 is 1.7 times more volatile than ScanSource. It trades about 0.18 of its potential returns per unit of risk. ScanSource is currently generating about 0.03 per unit of risk. If you would invest  127.00  in Rio2 on September 14, 2025 and sell it today you would earn a total of  142.00  from holding Rio2 or generate 111.81% return on investment over 90 days.

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

Rio2  vs.  ScanSource

Rio2

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rio2 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Rio2 displayed 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. In spite of rather sound basic indicators, ScanSource is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Rio2 and ScanSource

The main advantage of trading using opposite Rio2 and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio2 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 Rio2 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.