Correlation Between Hewlett Packard and CDW Corp

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

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

Diversification Opportunities for Hewlett Packard and CDW Corp

0.6

Correlation Coefficient

Hewlett Packard  CDW Corp

Poor diversification

The 3 months correlation between Hewlett and CDW is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hewlett Packard Enterprise and CDW Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CDW Corp and Hewlett Packard 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 Hewlett Packard Enterprise 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 Hewlett Packard i.e., Hewlett Packard and CDW Corp go up and down completely randomly.

Pair Corralation between Hewlett Packard and CDW Corp

Considering the 90-day investment horizon Hewlett Packard Enterprise is expected to generate 0.49 times more return on investment than CDW Corp. However, Hewlett Packard Enterprise is 2.05 times less risky than CDW Corp. It trades about -0.25 of its potential returns per unit of risk. CDW Corp is currently generating about -0.25 per unit of risk. If you would invest  1,770  in Hewlett Packard Enterprise on February 2, 2024 and sell it today you would lose (126.00) from holding Hewlett Packard Enterprise or give up 7.12% of portfolio value over 90 days.

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

Hewlett Packard Enterprise  vs.  CDW Corp

Hewlett Packard Ente

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hewlett Packard Enterprise are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Hewlett Packard may actually be approaching a critical reversion point that can send shares even higher in June 2024.

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 Hewlett Packard and CDW Corp

The main advantage of trading using opposite Hewlett Packard and CDW Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hewlett Packard 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 Hewlett Packard Enterprise 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.