Correlation Between CDW Corp and NETGEAR
Can any of the company-specific risk be diversified away by investing in both CDW Corp and NETGEAR 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 NETGEAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CDW Corp and NETGEAR, you can compare the effects of market volatilities on CDW Corp and NETGEAR 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 NETGEAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDW Corp and NETGEAR.
Diversification Opportunities for CDW Corp and NETGEAR
Poor diversification
The 3 months correlation between CDW and NETGEAR is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding CDW Corp and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of CDW Corp i.e., CDW Corp and NETGEAR go up and down completely randomly.
Pair Corralation between CDW Corp and NETGEAR
Considering the 90-day investment horizon CDW Corp is expected to under-perform the NETGEAR. But the stock apears to be less risky and, when comparing its historical volatility, CDW Corp is 1.7 times less risky than NETGEAR. The stock trades about -0.1 of its potential returns per unit of risk. The NETGEAR is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 3,047 in NETGEAR on May 26, 2025 and sell it today you would lose (299.00) from holding NETGEAR or give up 9.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CDW Corp vs. NETGEAR
Performance |
| Timeline |
| CDW Corp |
| NETGEAR |
CDW Corp and NETGEAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CDW Corp and NETGEAR
The main advantage of trading using opposite CDW Corp and NETGEAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDW Corp position performs unexpectedly, NETGEAR 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 NETGEAR will offset losses from the drop in NETGEAR's long position.| CDW Corp vs. Gartner | CDW Corp vs. Cognizant Technology Solutions | CDW Corp vs. Leidos Holdings | CDW Corp vs. CACI International |
| NETGEAR vs. Knowles Cor | NETGEAR vs. Extreme Networks | NETGEAR vs. KVH Industries | NETGEAR vs. Comtech Telecommunications Corp |
Check out your portfolio center.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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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