Correlation Between SHIP HEALTHCARE and CVS Health

Can any of the company-specific risk be diversified away by investing in both SHIP HEALTHCARE and CVS Health 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 SHIP HEALTHCARE and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SHIP HEALTHCARE HLDGINC and CVS Health, you can compare the effects of market volatilities on SHIP HEALTHCARE and CVS Health 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 SHIP HEALTHCARE with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of SHIP HEALTHCARE and CVS Health.

Diversification Opportunities for SHIP HEALTHCARE and CVS Health

-0.8

Correlation Coefficient

SHIP HEALTHCARE  CVS Health

Pay attention - limited upside

The 3 months correlation between SHIP and CVS is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding SHIP HEALTHCARE HLDGINC and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and SHIP HEALTHCARE 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 SHIP HEALTHCARE HLDGINC are associated (or correlated) with CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of SHIP HEALTHCARE i.e., SHIP HEALTHCARE and CVS Health go up and down completely randomly.

Pair Corralation between SHIP HEALTHCARE and CVS Health

Assuming the 90 days horizon SHIP HEALTHCARE HLDGINC is expected to under-perform the CVS Health. But the stock apears to be less risky and, when comparing its historical volatility, SHIP HEALTHCARE HLDGINC is 1.94 times less risky than CVS Health. The stock trades about -0.07 of its potential returns per unit of risk. The CVS Health is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  4,188  in CVS Health on December 27, 2024 and sell it today you would earn a total of  2,102  from holding CVS Health or generate 50.19% return on investment over 90 days.

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

SHIP HEALTHCARE HLDGINC  vs.  CVS Health

SHIP HEALTHCARE HLDGINC

Risk-Adjusted Performance

Very Weak

Over the last 90 days SHIP HEALTHCARE HLDGINC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CVS Health

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, CVS Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SHIP HEALTHCARE and CVS Health

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

The idea behind SHIP HEALTHCARE HLDGINC and CVS 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.