Correlation Between CDW Corp and Formula Systems

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

By analyzing existing cross correlation between CDW Corp and Formula Systems 1985, you can compare the effects of market volatilities on CDW Corp and Formula Systems 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 Formula Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDW Corp and Formula Systems.

Diversification Opportunities for CDW Corp and Formula Systems

0.19

Correlation Coefficient

CDW Corp  Formula Systems

Average diversification

The 3 months correlation between CDW and Formula is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding CDW Corp and Formula Systems 1985 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formula Systems 1985 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 Formula Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formula Systems 1985 has no effect on the direction of CDW Corp i.e., CDW Corp and Formula Systems go up and down completely randomly.

Pair Corralation between CDW Corp and Formula Systems

Considering the 90-day investment horizon CDW Corp is expected to generate 0.5 times more return on investment than Formula Systems. However, CDW Corp is 2.01 times less risky than Formula Systems. It trades about 0.04 of its potential returns per unit of risk. Formula Systems 1985 is currently generating about -0.37 per unit of risk. If you would invest  22,238  in CDW Corp on March 10, 2024 and sell it today you would earn a total of  186.00  from holding CDW Corp or generate 0.84% return on investment over 90 days.

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

CDW Corp  vs.  Formula Systems 1985

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 weak 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.

Formula Systems 1985

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Formula Systems 1985 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic 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 Formula Systems

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

The idea behind CDW Corp and Formula Systems 1985 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.