Correlation Between International Business and CDW
Can any of the company-specific risk be diversified away by investing in both International Business 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 International Business and CDW into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Business Machines and CDW Corporation, you can compare the effects of market volatilities on International Business 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 International Business with a short position of CDW. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Business and CDW.
Diversification Opportunities for International Business and CDW
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and CDW is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding International Business Machine and CDW Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corporation and International Business 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 International Business Machines 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 International Business i.e., International Business and CDW go up and down completely randomly.
Pair Corralation between International Business and CDW
Assuming the 90 days horizon International Business is expected to generate 16.88 times less return on investment than CDW. But when comparing it to its historical volatility, International Business Machines is 1.08 times less risky than CDW. It trades about 0.01 of its potential returns per unit of risk. CDW Corporation is currently generating about 0.2 of returns per unit of risk over similar time horizon. 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 |
International Business Machine vs. CDW Corp.
Performance |
| Timeline |
| International Business |
| CDW Corporation |
International Business and CDW Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Business and CDW
The main advantage of trading using opposite International Business and CDW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Business 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.| International Business vs. MUTUIONLINE | International Business vs. GungHo Online Entertainment | International Business vs. YATRA ONLINE DL 0001 | International Business vs. Plastic Omnium |
| CDW vs. SILICON LABORATOR | CDW vs. JAPAN TOBACCO UNSPADR12 | CDW vs. GRUPO CARSO A1 | CDW vs. TIANDE CHEMICAL |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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