ScanSource’s Upside Edge Masks a Deep‑Downside Asymmetry

Four risk flags and a historic drawdown suggest the rally may be fragile in a high‑volatility market

SCSC ScanSource, Inc.

In this report

01

Returns Overview

Period returns, alpha, cumulative performance, distributions

P. 2-3

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02

Volatility Analysis

Annualized volatility, downside deviation, drawdowns

P. 4-5

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03

Beta & Correlation

Trailing, upside, downside beta, systematic risk

P. 6-7

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04

Risk-Adjusted Returns

Sharpe, Sortino, Calmar, Information, Treynor

P. 8-9

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05

Market Regime Analysis

Bull/bear behavior, capture ratios

P. 10-11

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06

Investment Highlights & Risk Summary

Executive summary, risk flags, rankings

P. 12-13

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Returns Overview

ScanSource, Inc. (SCSC) — Return Performance

ScanSource, Inc. (SCSC) delivered a mixed return profile across horizons, posting strong short‑term momentum but lagging over longer intervals. Over the past month the stock rose 0.95% while generating 3.54% alpha versus its sector ETF and an impressive 6.56% alpha versus the broader technology index, indicating a brief outperformance spike. However, cumulative returns over three to five years (58.02% and 66.05%, respectively) were accompanied by negative alpha of –7.89% and –5.76% against the sector, reflecting underperformance despite absolute gains.

Period Returns vs S&P 500 & XLK

Monthly Returns Heatmap

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The stock produced positive alpha in the 1‑month (3.54% vs sector) and 1‑year (–7.28%) windows, but its alpha turned sharply negative beyond one year, reaching –86.86% versus the technology index over five years. This divergence suggests that recent catalysts drove short‑term upside, while structural or competitive pressures have limited relative performance in the medium to long term.

Returns Overview

ScanSource, Inc. (SCSC) — Return Charts

Volatility Analysis

ScanSource, Inc. (SCSC) — Volatility Profile

ScanSource, Inc. (SCSC) exhibits markedly higher price variability than the broader market, with an annualized volatility of 39.19% compared to the S&P 500's 17.78%, indicating more than double the fluctuation in daily returns over a year. The stock’s downside risk is pronounced: a downside deviation of 31.49% and a historical maximum drawdown of -67.54% between October 2017 and March 2020 reflect deep, prolonged equity losses that took nearly seven years to recover fully as of May 2024. Recent short‑term volatility remains elevated; the 60‑day vol of 34.6% exceeds the longer‑term 252‑day average of 37.95%, suggesting that current market conditions have not yet softened the stock’s inherent risk profile.

Volatility Metrics

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The company’s volatility is more than twice that of the S&P 500, underscoring a higher sensitivity to market and firm‑specific events. Downside metrics—31.49% downside deviation and a -67.54% max drawdown over a 2.5‑year peak‑to‑trough period—signal substantial tail risk, which investors should weigh against potential upside. While the 60‑day volatility (34.6%) sits slightly below the 252‑day average (37.95%), it remains well above market norms, indicating that short‑term price swings are still pronounced despite a modest recent easing.

Annualized volatility of SCSC is 39.19%, more than double the S&P 500 benchmark.
Downside deviation stands at 31.49%, reflecting heightened sensitivity to negative returns.
Maximum historical drawdown reached -67.54% over a 2.5‑year period, with recovery taking nearly seven years.
Current 60‑day volatility (34.6%) is lower than the 252‑day average (37.95%) but remains well above market levels.

Positive Characteristics
The recent decline in short‑term volatility suggests a modest easing of price turbulence relative to its longer‑term trend.
Recovery from the deep drawdown was completed by May 2024, demonstrating resilience after severe downside pressure.

Volatility Analysis

ScanSource, Inc. (SCSC) — Volatility & Drawdown Charts

Beta & Correlation

ScanSource, Inc. (SCSC) — Beta Profile

ScanSource, Inc. exhibits a trailing beta of 1.159 versus the S&P 500, placing it in the market‑like range (0.8–1.2). This suggests that the stock moves roughly in step with broad equity markets, offering neither pronounced defensive protection nor aggressive leverage to market swings. However, its sector beta of 0.739 relative to XLK indicates a muted response to technology‑sector dynamics, meaning much of its price action is driven by broader market forces rather than sector-specific news. The correlation figures—0.526 with the S&P 500 and 0.449 with XLK—reinforce this view, showing moderate co‑movement with both benchmarks but leaving ample room for company‑specific drivers.

Beta & Correlation Metrics

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The upside beta of 1.165 versus the downside beta of 1.219 reveals a slight asymmetry: the stock tends to fall a bit more sharply on market declines than it rises on gains, an important consideration for risk‑averse investors. An R-squared of 27.7% signals that only about one‑quarter of ScanSource’s returns are explained by movements in the S&P 500, leaving roughly 72.3% as idiosyncratic variance that can be diversified away through broader portfolio construction. The systematic component (27.7%) versus idiosyncratic risk (72.3%) underscores that most of the stock’s volatility stems from firm‑specific factors rather than market or sector trends.

Trailing beta of 1.159 classifies ScanSource as market‑like, implying comparable sensitivity to overall equity movements.
Downside beta (1.219) exceeds upside beta (1.165), indicating marginally higher downside risk during market declines.
R-squared of 27.7% shows limited explanatory power from the S&P 500, highlighting substantial idiosyncratic risk.
Systematic risk accounts for only 27.7% of total variance, while 72.3% is driven by company‑specific factors.
Sector beta of 0.739 reveals that technology sector exposure contributes less to ScanSource’s volatility than broad market exposure.

Positive Characteristics
The moderate market beta (1.159) provides familiar risk characteristics without extreme leverage.
Low sector beta (0.739) reduces sensitivity to tech‑sector turbulence, offering a diversification benefit within a technology‑heavy portfolio.
High idiosyncratic component suggests opportunities for active stock selection to capture upside independent of market moves.

Beta & Correlation

ScanSource, Inc. (SCSC) — Rolling Beta

Positive Notes

The moderate market beta (1.159) provides familiar risk characteristics without extreme leverage.

Low sector beta (0.739) reduces sensitivity to tech‑sector turbulence, offering a diversification benefit within a technology‑heavy portfolio.

High idiosyncratic component suggests opportunities for active stock selection to capture upside independent of market moves.

Risk-Adjusted Returns

ScanSource, Inc. (SCSC) — Risk-Adjusted Performance

ScanSource, Inc. (SCSC) delivers modest risk‑adjusted returns relative to the prevailing risk‑free rate of 3.63%. The Sharpe ratio of 0.144 indicates that the stock’s total return exceeds the risk‑free benchmark by only 14.4% per unit of overall volatility, far below the >1.0 threshold for attractive risk‑adjusted performance. Nonetheless, the Sortino ratio of 0.179 is higher than the Sharpe, suggesting that downside volatility is somewhat less pronounced than total volatility and that the equity’s return profile is marginally more favorable when focusing on negative deviations.

Risk-free rate: 3.63% (Fed Funds Rate)

Risk-Adjusted Metrics

SCSC

The Calmar ratio of 0.137 reflects a relatively small return per unit of maximum historical drawdown, implying that past price declines have eroded much of the equity’s upside potential. An Information Ratio of -0.105 signals that active management has not consistently generated alpha above a relevant benchmark, as negative values denote underperformance after adjusting for tracking error. The Treynor ratio of 4.867, however, shows a comparatively high return per unit of systematic (beta) risk, indicating that the stock may have been rewarded for market exposure despite its low absolute risk‑adjusted metrics.

Sharpe and Sortino ratios are both well below 1.0, highlighting limited excess return relative to volatility.
Sortino exceeds Sharpe, indicating that downside risk is less severe than total risk.
Calmar ratio of 0.137 points to significant drawdown pressure relative to average returns.
Negative Information Ratio suggests the stock has underperformed its benchmark on a risk‑adjusted basis.
Treynor ratio of 4.867 reflects relatively strong compensation for systematic market risk.

Positive Characteristics
Higher Sortino than Sharpe signals that downside volatility is modest compared with overall volatility.
Treynor ratio indicates the equity has delivered a respectable return per unit of beta exposure.

Risk-Adjusted Returns

ScanSource, Inc. (SCSC) — Rolling Sharpe & Sortino

Positive Notes

Higher Sortino than Sharpe signals that downside volatility is modest compared with overall volatility.

Treynor ratio indicates the equity has delivered a respectable return per unit of beta exposure.

Market Regime Analysis

ScanSource, Inc. (SCSC) — Regime Behavior

ScanSource, Inc. demonstrates pronounced sensitivity to market volatility and directionality. In bullish environments the stock outperforms, delivering an average monthly return of 2.19% during Bull-HighVol periods—substantially higher than its 1.42% gain in calmer Bull-LowVol markets—indicating a propensity to thrive when equity markets are both rising and volatile. Conversely, in bearish regimes the company underperforms, posting a -3.21% average loss in Bear‑LowVol months and a less severe but still negative -2.08% during Bear‑HighVol periods, reflecting vulnerability to downside risk despite slightly better performance when volatility is elevated. The upside capture of 117.2% suggests the stock participates fully in market rallies, yet a downside capture of 160.6% reveals it loses value at a rate considerably faster than the broader S&P 500 during declines. The resulting capture ratio of 0.73 underscores an asymmetric risk profile: strong upside participation is offset by pronounced downside exposure. With the current regime classified as Bull‑HighVol, ScanSource’s historical performance suggests continued above‑average gains, but investors should remain mindful of its heightened sensitivity to market swings.

Current Market Regime: Bull-HighVol

Bull-LowVol = calm uptrend • Bull-HighVol = volatile uptrend • Bear-LowVol = orderly decline • Bear-HighVol = crisis

Regime Returns & Capture Ratios

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During Bull‑LowVol periods, ScanSource generates modest returns (1.42% per month), reflecting steady growth in a tranquil uptrend. In the prevailing Bull‑HighVol regime, its average monthly return rises to 2.19%, indicating that heightened market volatility amplifies its upside potential. In Bear‑LowVol months, the stock suffers a steep -3.21% decline, signaling limited defensive qualities when markets fall calmly. However, in Bear‑HighVol conditions it loses less (-2.08%) than in Bear‑LowVol, suggesting some resilience when volatility is high during downturns, though downside risk remains substantial.

Market Regime Analysis

ScanSource, Inc. (SCSC) — Regime & Capture Charts

Regime Timeline

Upside capture of 117.2% shows the stock exceeds market gains in rising markets.
Downside capture of 160.6% indicates losses exceed the S&P 500 during declines, highlighting asymmetric risk.
Capture ratio of 0.73 (<1.0) confirms that downside exposure outweighs upside participation.
Performance improves markedly in volatile bullish environments (2.19% vs 1.42% in low‑vol bull markets).
Even in Bear‑HighVol periods, losses are less severe than in Bear‑LowVol, suggesting volatility cushions some downside.

Positive Characteristics
Strong upside capture and higher returns during Bull‑HighVol regimes provide attractive growth potential when markets are volatile but upward.
Reduced loss magnitude in Bear‑HighVol versus Bear‑LowVol indicates the stock can partially mitigate declines when market turbulence is high.

Investment Highlights & Risk Summary

ScanSource, Inc. (SCSC) — Summary & Implications

ScanSource, Inc. (SCSC) delivered an absolute 1‑year return of 11.72%, but its performance lagged the broader market by 7.28% and underperformed the technology sector ETF XLK by 31.07%. The stock exhibits elevated volatility at 39.19% annualized and a severe max drawdown of -67.54%, indicating substantial capital loss risk in adverse environments. Risk metrics are weak: a Sharpe ratio of 0.144 and Sortino of 0.179 suggest modest excess return per unit of total and downside risk, while the upside capture of 117.2% is more than offset by a downside capture of 160.6%, reflecting asymmetric exposure to market declines. Investors should weigh these concerns against the modest positive absolute return and the company’s beta of 1.159, which implies slightly higher sensitivity to market moves than the S&P 500.

Summary Dashboard

Investment Highlights

Positive 1‑year absolute return of 11.72% shows the business can generate earnings growth despite a challenging tech environment.
Upside capture of 117.2% indicates that in rising markets the stock tends to outperform the S&P 500, offering upside potential when broader equity sentiment improves.
Beta of 1.159 suggests the share price moves more than proportionally with market gains, which can amplify returns during bullish cycles.

Risk-Return Rankings

SCSC HIGH

High volatility and deep drawdown dominate a modest positive return, resulting in an elevated risk‑return profile.

Strength: Upside capture of 117.2% provides upside participation in market rallies.

Concern: Max drawdown of -67.54% and downside capture of 160.6% signal severe loss potential in downturns.

Key Takeaways

The stock’s absolute return is positive but fails to offset a large negative alpha versus both the S&P 500 (-7.28%) and its sector (-31.07%).
Risk‑adjusted performance is weak, with Sharpe (0.144) and Sortino (0.179) far below commonly accepted thresholds (>1.0).
Downside capture of 160.6% indicates the share loses more than the market in declines, creating asymmetric risk.
High annualized volatility (39.19%) and a historic max drawdown of -67.54% highlight capital preservation concerns.

PORTFOLIO IMPLICATIONS

Given its high downside sensitivity and elevated volatility, ScanSource may be suited only for investors with strong risk tolerance or as a small tactical allocation within a diversified equity basket that can absorb large swings. The upside capture suggests it could add marginal upside in a bull market, but the deep drawdown history warrants pairing it with lower‑beta, low‑volatility assets to dampen portfolio volatility and protect against downside shocks.

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Report written 2026-06-07 • Finexus

Disclaimer

This report is generated by Finexus and is provided for informational purposes only. It does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security.

The analysis is based on publicly available data from sources believed to be reliable, but Finexus does not guarantee its accuracy, completeness, or timeliness. Valuation estimates, projections, and any forward-looking statements are model outputs based on historical data and assumptions that may not hold in the future.

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