Correlation Between CDW Corp and Reservoir Media

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

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

Diversification Opportunities for CDW Corp and Reservoir Media

-0.68

Correlation Coefficient

CDW Corp  Reservoir Media

Excellent diversification

The 3 months correlation between CDW and Reservoir is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding CDW Corp and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media 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 Reservoir Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reservoir Media has no effect on the direction of CDW Corp i.e., CDW Corp and Reservoir Media go up and down completely randomly.

Pair Corralation between CDW Corp and Reservoir Media

Considering the 90-day investment horizon CDW Corp is expected to under-perform the Reservoir Media. But the stock apears to be less risky and, when comparing its historical volatility, CDW Corp is 1.41 times less risky than Reservoir Media. The stock trades about -0.04 of its potential returns per unit of risk. The Reservoir Media is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  592.00  in Reservoir Media on October 5, 2024 and sell it today you would earn a total of  262.00  from holding Reservoir Media or generate 44.26% return on investment over 90 days.

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

CDW Corp  vs.  Reservoir Media

CDW Corp

Risk-Adjusted Performance

0 of 100

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 inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Reservoir Media

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Reservoir Media reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CDW Corp and Reservoir Media

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

The idea behind CDW Corp and Reservoir Media 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.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.