Correlation Between CDW Corp and Group 1
Can any of the company-specific risk be diversified away by investing in both CDW Corp and Group 1 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 Corp and Group 1 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CDW Corp and Group 1 Automotive, you can compare the effects of market volatilities on CDW Corp and Group 1 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 Corp with a short position of Group 1. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDW Corp and Group 1.
Diversification Opportunities for CDW Corp and Group 1
Weak diversification
The 3 months correlation between CDW and Group is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding CDW Corp and Group 1 Automotive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Group 1 Automotive and CDW Corp 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 Corp are associated (or correlated) with Group 1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Group 1 Automotive has no effect on the direction of CDW Corp i.e., CDW Corp and Group 1 go up and down completely randomly.
Pair Corralation between CDW Corp and Group 1
Considering the 90-day investment horizon CDW Corp is expected to generate 1.19 times less return on investment than Group 1. But when comparing it to its historical volatility, CDW Corp is 1.07 times less risky than Group 1. It trades about 0.34 of its potential returns per unit of risk. Group 1 Automotive is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 42,070 in Group 1 Automotive on November 9, 2024 and sell it today you would earn a total of 5,154 from holding Group 1 Automotive or generate 12.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CDW Corp vs. Group 1 Automotive
Performance |
| Timeline |
| CDW Corp |
| Group 1 Automotive |
CDW Corp and Group 1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CDW Corp and Group 1
The main advantage of trading using opposite CDW Corp and Group 1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDW Corp position performs unexpectedly, Group 1 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 Group 1 will offset losses from the drop in Group 1's long position.| CDW Corp vs. CACI International | CDW Corp vs. Jack Henry Associates | CDW Corp vs. Broadridge Financial Solutions | CDW Corp vs. ExlService Holdings |
| Group 1 vs. Penske Automotive Group | Group 1 vs. Lithia Motors | Group 1 vs. AutoNation | Group 1 vs. Asbury Automotive Group |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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