Correlation Between CDK Global and Shopify
Can any of the company-specific risk be diversified away by investing in both CDK Global and Shopify 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 CDK Global and Shopify into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CDK Global Holdings and Shopify, you can compare the effects of market volatilities on CDK Global and Shopify 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 CDK Global with a short position of Shopify. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDK Global and Shopify.
Diversification Opportunities for CDK Global and Shopify
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CDK and Shopify is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding CDK Global Holdings and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify and CDK Global 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 CDK Global Holdings are associated (or correlated) with Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of CDK Global i.e., CDK Global and Shopify go up and down completely randomly.
Pair Corralation between CDK Global and Shopify
If you would invest 5,476 in CDK Global Holdings on January 25, 2024 and sell it today you would earn a total of 0.00 from holding CDK Global Holdings or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
CDK Global Holdings vs. Shopify
Performance |
| Timeline |
| CDK Global Holdings |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Shopify |
CDK Global and Shopify Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CDK Global and Shopify
The main advantage of trading using opposite CDK Global and Shopify positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDK Global position performs unexpectedly, Shopify 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 Shopify will offset losses from the drop in Shopify's long position.The idea behind CDK Global Holdings and Shopify 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.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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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