Correlation Between CDW Corp and Infosys

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

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

Diversification Opportunities for CDW Corp and Infosys

-0.34

Correlation Coefficient

CDW Corp  Infosys

Very good diversification

The 3 months correlation between CDW and Infosys is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding CDW Corp and Infosys Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infosys Ltd ADR 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 Infosys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infosys Ltd ADR has no effect on the direction of CDW Corp i.e., CDW Corp and Infosys go up and down completely randomly.

Pair Corralation between CDW Corp and Infosys

Considering the 90-day investment horizon CDW Corp is expected to generate 0.88 times more return on investment than Infosys. However, CDW Corp is 1.14 times less risky than Infosys. It trades about -0.17 of its potential returns per unit of risk. Infosys Ltd ADR is currently generating about -0.17 per unit of risk. If you would invest  25,306  in CDW Corp on February 1, 2024 and sell it today you would lose (1,120) from holding CDW Corp or give up 4.43% of portfolio value over 90 days.

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

CDW Corp  vs.  Infosys Ltd ADR

CDW Corp

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CDW Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Infosys Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infosys Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CDW Corp and Infosys

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

The idea behind CDW Corp and Infosys Ltd ADR 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.