Correlation Between CVS Health and Polar Capital

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

Diversification Opportunities for CVS Health and Polar Capital

-0.51

Correlation Coefficient

CVS Health  Polar Capital

Excellent diversification

The 3 months correlation between CVS and Polar is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Polar Capital Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Technology 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 Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Technology has no effect on the direction of CVS Health i.e., CVS Health and Polar Capital go up and down completely randomly.

Pair Corralation between CVS Health and Polar Capital

Assuming the 90 days trading horizon CVS Health Corp is expected to generate 1.43 times more return on investment than Polar Capital. However, CVS Health is 1.43 times more volatile than Polar Capital Technology. It trades about 0.27 of its potential returns per unit of risk. Polar Capital Technology is currently generating about -0.11 per unit of risk. If you would invest  4,348  in CVS Health Corp on December 29, 2024 and sell it today you would earn a total of  2,393  from holding CVS Health Corp or generate 55.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

CVS Health Corp  vs.  Polar Capital Technology

CVS Health Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health Corp are ranked lower than 20 (%) 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.

Polar Capital Technology

Risk-Adjusted Performance

Very Weak

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

Pair Trading with CVS Health and Polar Capital

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

The idea behind CVS Health Corp and Polar Capital Technology 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.