Correlation Between Weibo Corp and CDW Corp

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

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

Diversification Opportunities for Weibo Corp and CDW Corp

0.09

Correlation Coefficient

Weibo Corp  CDW Corp

Significant diversification

The 3 months correlation between Weibo and CDW is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Weibo Corp and CDW Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corp and Weibo 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 Weibo Corp 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 Weibo Corp i.e., Weibo Corp and CDW Corp go up and down completely randomly.

Pair Corralation between Weibo Corp and CDW Corp

Allowing for the 90-day total investment horizon Weibo Corp is expected to generate 1.67 times more return on investment than CDW Corp. However, Weibo Corp is 1.67 times more volatile than CDW Corp. It trades about 0.04 of its potential returns per unit of risk. CDW Corp is currently generating about -0.07 per unit of risk. If you would invest  768.00  in Weibo Corp on October 12, 2024 and sell it today you would earn a total of  144.00  from holding Weibo Corp or generate 18.75% return on investment over 90 days.

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

Weibo Corp  vs.  CDW Corp

Weibo Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weibo Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Weibo Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 uncertain 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.

Pair Trading with Weibo Corp and CDW Corp

The main advantage of trading using opposite Weibo Corp and CDW Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weibo Corp 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 Weibo Corp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.