Correlation Between Edgewell Personal and CDW Corp

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

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

Diversification Opportunities for Edgewell Personal and CDW Corp

0.13

Correlation Coefficient

Edgewell Personal  CDW Corp

Average diversification

The 3 months correlation between Edgewell and CDW is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Edgewell Personal Care and CDW Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corp and Edgewell Personal 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 Edgewell Personal Care are associated (or correlated) with CDW Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CDW Corp has no effect on the direction of Edgewell Personal i.e., Edgewell Personal and CDW Corp go up and down completely randomly.

Pair Corralation between Edgewell Personal and CDW Corp

Considering the 90-day investment horizon Edgewell Personal Care is expected to under-perform the CDW Corp. But the stock apears to be less risky and, when comparing its historical volatility, Edgewell Personal Care is 1.05 times less risky than CDW Corp. The stock trades about -0.05 of its potential returns per unit of risk. The CDW Corp is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  17,712  in CDW Corp on October 26, 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Edgewell Personal Care  vs.  CDW Corp

Edgewell Personal Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edgewell Personal Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Edgewell Personal is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Edgewell Personal and CDW Corp

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

The idea behind Edgewell Personal Care and CDW 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.