Correlation Between CDW Corp and Zepp Health

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

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

Diversification Opportunities for CDW Corp and Zepp Health

0.87

Correlation Coefficient

CDW Corp  Zepp Health

Very poor diversification

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

Pair Corralation between CDW Corp and Zepp Health

Considering the 90-day investment horizon CDW Corp is expected to generate 1.36 times less return on investment than Zepp Health. But when comparing it to its historical volatility, CDW Corp is 2.91 times less risky than Zepp Health. It trades about 0.29 of its potential returns per unit of risk. Zepp Health Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  287.00  in Zepp Health Corp on October 24, 2024 and sell it today you would earn a total of  26.00  from holding Zepp Health Corp or generate 9.06% return on investment over 90 days.

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

CDW Corp  vs.  Zepp Health Corp

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.

Zepp Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zepp Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Zepp Health is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CDW Corp and Zepp Health

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

The idea behind CDW Corp and Zepp Health Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.