Correlation Between CDW Corp and Flex

Can any of the company-specific risk be diversified away by investing in both CDW Corp and Flex 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 Flex into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CDW Corp and Flex, you can compare the effects of market volatilities on CDW Corp and Flex 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 Flex. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDW Corp and Flex.

Diversification Opportunities for CDW Corp and Flex

0.87

Correlation Coefficient

CDW Corp  Flex

Very poor diversification

The 3 months correlation between CDW and Flex is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding CDW Corp and Flex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flex 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 Flex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flex has no effect on the direction of CDW Corp i.e., CDW Corp and Flex go up and down completely randomly.

Pair Corralation between CDW Corp and Flex

Considering the 90-day investment horizon CDW Corp is expected to generate 0.59 times more return on investment than Flex. However, CDW Corp is 1.7 times less risky than Flex. It trades about -0.04 of its potential returns per unit of risk. Flex is currently generating about -0.03 per unit of risk. If you would invest  17,653  in CDW Corp on December 26, 2024 and sell it today you would lose (801.00) from holding CDW Corp or give up 4.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

CDW Corp  vs.  Flex

CDW Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days CDW Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, CDW Corp is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Flex

Risk-Adjusted Performance

Very Weak

Over the last 90 days Flex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Flex is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CDW Corp and Flex

The main advantage of trading using opposite CDW Corp and Flex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDW Corp position performs unexpectedly, Flex 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 Flex will offset losses from the drop in Flex's long position.

The idea behind CDW Corp and Flex 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.

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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.