Correlation Between CDW and International Business
Can any of the company-specific risk be diversified away by investing in both CDW and International Business 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 CDW and International Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CDW Corporation and International Business Machines, you can compare the effects of market volatilities on CDW and International Business 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 CDW with a short position of International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDW and International Business.
Diversification Opportunities for CDW and International Business
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CDW and International is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding CDW Corp. and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business and CDW 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 CDW Corporation are associated (or correlated) with International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of CDW i.e., CDW and International Business go up and down completely randomly.
Pair Corralation between CDW and International Business
Assuming the 90 days horizon CDW Corporation is expected to generate 1.08 times more return on investment than International Business. However, CDW is 1.08 times more volatile than International Business Machines. It trades about 0.2 of its potential returns per unit of risk. International Business Machines is currently generating about 0.01 per unit of risk. If you would invest 17,175 in CDW Corporation on October 26, 2024 and sell it today you would earn a total of 1,735 from holding CDW Corporation or generate 10.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CDW Corp. vs. International Business Machine
Performance |
| Timeline |
| CDW Corporation |
| International Business |
CDW and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CDW and International Business
The main advantage of trading using opposite CDW and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDW position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| CDW vs. SILICON LABORATOR | CDW vs. JAPAN TOBACCO UNSPADR12 | CDW vs. GRUPO CARSO A1 | CDW vs. TIANDE CHEMICAL |
| International Business vs. MUTUIONLINE | International Business vs. GungHo Online Entertainment | International Business vs. YATRA ONLINE DL 0001 | International Business vs. Plastic Omnium |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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