Correlation Between CVS Health and AP Moeller

Can any of the company-specific risk be diversified away by investing in both CVS Health and AP Moeller 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 AP Moeller 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 AP Moeller , you can compare the effects of market volatilities on CVS Health and AP Moeller 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 AP Moeller. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and AP Moeller.

Diversification Opportunities for CVS Health and AP Moeller

-0.32

Correlation Coefficient

CVS Health  AP Moeller

Very good diversification

The 3 months correlation between CVS and 0O77 is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and AP Moeller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Moeller 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 AP Moeller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Moeller has no effect on the direction of CVS Health i.e., CVS Health and AP Moeller go up and down completely randomly.

Pair Corralation between CVS Health and AP Moeller

Assuming the 90 days trading horizon CVS Health Corp is expected to under-perform the AP Moeller. In addition to that, CVS Health is 1.08 times more volatile than AP Moeller . It trades about -0.03 of its total potential returns per unit of risk. AP Moeller is currently generating about 0.0 per unit of volatility. If you would invest  1,055,313  in AP Moeller on October 22, 2024 and sell it today you would lose (26,313) from holding AP Moeller or give up 2.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

CVS Health Corp  vs.  AP Moeller

CVS Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CVS Health is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

AP Moeller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AP Moeller has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AP Moeller is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CVS Health and AP Moeller

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

The idea behind CVS Health Corp and AP Moeller 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.