Correlation Between CVS Health and Eco Animal

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

Diversification Opportunities for CVS Health and Eco Animal

-0.22

Correlation Coefficient

CVS Health  Eco Animal

Very good diversification

The 3 months correlation between CVS and Eco is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Eco Animal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Animal Health 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 Eco Animal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Animal Health has no effect on the direction of CVS Health i.e., CVS Health and Eco Animal go up and down completely randomly.

Pair Corralation between CVS Health and Eco Animal

Assuming the 90 days trading horizon CVS Health Corp is expected to generate 0.68 times more return on investment than Eco Animal. However, CVS Health Corp is 1.47 times less risky than Eco Animal. It trades about 0.04 of its potential returns per unit of risk. Eco Animal Health is currently generating about -0.16 per unit of risk. If you would invest  5,686  in CVS Health Corp on September 3, 2024 and sell it today you would earn a total of  286.00  from holding CVS Health Corp or generate 5.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CVS Health Corp  vs.  Eco Animal Health

CVS Health Corp

Risk-Adjusted Performance

3 of 100

Insignificant

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

Eco Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eco Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with CVS Health and Eco Animal

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

The idea behind CVS Health Corp and Eco Animal Health 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.