Correlation Between Leidos Holdings and CDW Corp

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

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

Diversification Opportunities for Leidos Holdings and CDW Corp

0.26

Correlation Coefficient

Leidos Holdings  CDW Corp

Modest diversification

The 3 months correlation between Leidos and CDW is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Leidos Holdings and CDW Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corp and Leidos Holdings 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 Leidos Holdings 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 Leidos Holdings i.e., Leidos Holdings and CDW Corp go up and down completely randomly.

Pair Corralation between Leidos Holdings and CDW Corp

Given the investment horizon of 90 days Leidos Holdings is expected to under-perform the CDW Corp. In addition to that, Leidos Holdings is 1.18 times more volatile than CDW Corp. It trades about -0.04 of its total potential returns per unit of risk. CDW Corp is currently generating about -0.04 per unit of volatility. If you would invest  17,522  in CDW Corp on December 27, 2024 and sell it today you would lose (789.00) from holding CDW Corp or give up 4.5% of portfolio value over 90 days.

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

Leidos Holdings  vs.  CDW Corp

Leidos Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Leidos Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Leidos Holdings is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with Leidos Holdings and CDW Corp

The main advantage of trading using opposite Leidos Holdings and CDW Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Leidos Holdings 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 Leidos Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.