Correlation Between CVS Health and SilverCrest Metals

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

Diversification Opportunities for CVS Health and SilverCrest Metals

-0.73

Correlation Coefficient

CVS Health  SilverCrest Metals

Pay attention - limited upside

The 3 months correlation between CVS and SilverCrest is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and SilverCrest Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SilverCrest Metals 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 SilverCrest Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SilverCrest Metals has no effect on the direction of CVS Health i.e., CVS Health and SilverCrest Metals go up and down completely randomly.

Pair Corralation between CVS Health and SilverCrest Metals

Assuming the 90 days trading horizon CVS Health Corp is expected to under-perform the SilverCrest Metals. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health Corp is 1.98 times less risky than SilverCrest Metals. The stock trades about -0.01 of its potential returns per unit of risk. The SilverCrest Metals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,406  in SilverCrest Metals on October 26, 2024 and sell it today you would earn a total of  23.00  from holding SilverCrest Metals or generate 1.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	30.65%
Values	Daily Returns

CVS Health Corp  vs.  SilverCrest Metals

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

SilverCrest Metals

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days SilverCrest Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, SilverCrest Metals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS Health and SilverCrest Metals

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

The idea behind CVS Health Corp and SilverCrest Metals 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.