Correlation Between CVS Health and Spire Healthcare

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

Diversification Opportunities for CVS Health and Spire Healthcare

0.03

Correlation Coefficient

CVS Health  Spire Healthcare

Significant diversification

The 3 months correlation between CVS and Spire is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Spire Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Healthcare 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 Spire Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Healthcare has no effect on the direction of CVS Health i.e., CVS Health and Spire Healthcare go up and down completely randomly.

Pair Corralation between CVS Health and Spire Healthcare

Assuming the 90 days trading horizon CVS Health Corp is expected to generate 3.19 times more return on investment than Spire Healthcare. However, CVS Health is 3.19 times more volatile than Spire Healthcare Group. It trades about 0.07 of its potential returns per unit of risk. Spire Healthcare Group is currently generating about 0.04 per unit of risk. If you would invest  5,860  in CVS Health Corp on December 3, 2024 and sell it today you would earn a total of  666.00  from holding CVS Health Corp or generate 11.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

CVS Health Corp  vs.  Spire Healthcare Group

CVS Health Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, CVS Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Spire Healthcare

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Spire Healthcare Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Spire Healthcare is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CVS Health and Spire Healthcare

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

The idea behind CVS Health Corp and Spire Healthcare Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.