Correlation Between GM and CDW
Can any of the company-specific risk be diversified away by investing in both GM and CDW 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 GM and CDW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and CDW Corporation, you can compare the effects of market volatilities on GM and CDW 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 GM with a short position of CDW. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and CDW.
Diversification Opportunities for GM and CDW
Very good diversification
The 3 months correlation between GM and CDW is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and CDW Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corporation and GM 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 General Motors are associated (or correlated) with CDW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDW Corporation has no effect on the direction of GM i.e., GM and CDW go up and down completely randomly.
Pair Corralation between GM and CDW
Allowing for the 90-day total investment horizon General Motors is expected to under-perform the CDW. In addition to that, GM is 2.61 times more volatile than CDW Corporation. It trades about -0.13 of its total potential returns per unit of risk. CDW Corporation is currently generating about 0.45 per unit of volatility. If you would invest 17,195 in CDW Corporation on November 5, 2024 and sell it today you would earn a total of 1,730 from holding CDW Corporation or generate 10.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. CDW Corp.
Performance |
| Timeline |
| General Motors |
| CDW Corporation |
GM and CDW Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and CDW
The main advantage of trading using opposite GM and CDW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, CDW 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 CDW will offset losses from the drop in CDW's long position.The idea behind General Motors and CDW Corporation 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.| CDW vs. ELMOS SEMICONDUCTOR | CDW vs. Lattice Semiconductor | CDW vs. MagnaChip Semiconductor Corp | CDW vs. Transport International Holdings |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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