Correlation Between Group 1 and CDW Corp
Can any of the company-specific risk be diversified away by investing in both Group 1 and CDW Corp 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 Group 1 and CDW Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Group 1 Automotive and CDW Corp, you can compare the effects of market volatilities on Group 1 and CDW Corp 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 Group 1 with a short position of CDW Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Group 1 and CDW Corp.
Diversification Opportunities for Group 1 and CDW Corp
Weak diversification
The 3 months correlation between Group and CDW is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Group 1 Automotive and CDW Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corp and Group 1 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 Group 1 Automotive are associated (or correlated) with CDW Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDW Corp has no effect on the direction of Group 1 i.e., Group 1 and CDW Corp go up and down completely randomly.
Pair Corralation between Group 1 and CDW Corp
Considering the 90-day investment horizon Group 1 Automotive is expected to generate 1.07 times more return on investment than CDW Corp. However, Group 1 is 1.07 times more volatile than CDW Corp. It trades about 0.38 of its potential returns per unit of risk. CDW Corp is currently generating about 0.34 per unit of risk. 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 |
Group 1 Automotive vs. CDW Corp
Performance |
| Timeline |
| Group 1 Automotive |
| CDW Corp |
Group 1 and CDW Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Group 1 and CDW Corp
The main advantage of trading using opposite Group 1 and CDW Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group 1 position performs unexpectedly, CDW Corp 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 Corp will offset losses from the drop in CDW Corp's long position.| Group 1 vs. Penske Automotive Group | Group 1 vs. Lithia Motors | Group 1 vs. AutoNation | Group 1 vs. Asbury Automotive Group |
| CDW Corp vs. CACI International | CDW Corp vs. Jack Henry Associates | CDW Corp vs. Broadridge Financial Solutions | CDW Corp vs. ExlService 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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