Correlation Between CVS Health and Zoom Video

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

By analyzing existing cross correlation between CVS Health Corp and Zoom Video Communications, you can compare the effects of market volatilities on CVS Health and Zoom Video 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 CVS Health with a short position of Zoom Video. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Zoom Video.

Diversification Opportunities for CVS Health and Zoom Video

0.2

Correlation Coefficient

CVS Health  Zoom Video

Modest diversification

The 3 months correlation between CVS and Zoom is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Zoom Video Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoom Video Communications and CVS Health 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 CVS Health Corp are associated (or correlated) with Zoom Video. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoom Video Communications has no effect on the direction of CVS Health i.e., CVS Health and Zoom Video go up and down completely randomly.

Pair Corralation between CVS Health and Zoom Video

Assuming the 90 days trading horizon CVS Health Corp is expected to under-perform the Zoom Video. In addition to that, CVS Health is 1.1 times more volatile than Zoom Video Communications. It trades about 0.0 of its total potential returns per unit of risk. Zoom Video Communications is currently generating about 0.03 per unit of volatility. If you would invest  6,982  in Zoom Video Communications on November 20, 2024 and sell it today you would earn a total of  1,269  from holding Zoom Video Communications or generate 18.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.59%
Values	Daily Returns

CVS Health Corp  vs.  Zoom Video Communications

CVS Health Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CVS Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Zoom Video Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Zoom Video Communications are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Zoom Video may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with CVS Health and Zoom Video

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

The idea behind CVS Health Corp and Zoom Video Communications 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.