Correlation Between CDW Corp and Sonida Senior

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

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

Diversification Opportunities for CDW Corp and Sonida Senior

0.51

Correlation Coefficient

CDW Corp  Sonida Senior

Very weak diversification

The 3 months correlation between CDW and Sonida is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding CDW Corp and Sonida Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonida Senior Living 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 Sonida Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonida Senior Living has no effect on the direction of CDW Corp i.e., CDW Corp and Sonida Senior go up and down completely randomly.

Pair Corralation between CDW Corp and Sonida Senior

Considering the 90-day investment horizon CDW Corp is expected to generate 0.66 times more return on investment than Sonida Senior. However, CDW Corp is 1.51 times less risky than Sonida Senior. It trades about 0.35 of its potential returns per unit of risk. Sonida Senior Living is currently generating about 0.04 per unit of risk. If you would invest  17,712  in CDW Corp on October 27, 2024 and sell it today you would earn a total of  1,801  from holding CDW Corp or generate 10.17% return on investment over 90 days.

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

CDW Corp  vs.  Sonida Senior Living

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 latest inconsistent performance, the Stock's fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Sonida Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonida Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with CDW Corp and Sonida Senior

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

The idea behind CDW Corp and Sonida Senior Living 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.