Correlation Between Amedisys and CVS Health

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

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

Diversification Opportunities for Amedisys and CVS Health

0.22

Correlation Coefficient

Amedisys  CVS Health

Modest diversification

The 3 months correlation between Amedisys and CVS is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Amedisys and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp and Amedisys 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 Amedisys 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 Corp has no effect on the direction of Amedisys i.e., Amedisys and CVS Health go up and down completely randomly.

Pair Corralation between Amedisys and CVS Health

Given the investment horizon of 90 days Amedisys is expected to generate 17.15 times less return on investment than CVS Health. But when comparing it to its historical volatility, Amedisys is 6.79 times less risky than CVS Health. It trades about 0.12 of its potential returns per unit of risk. CVS Health Corp is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  4,339  in CVS Health Corp on December 28, 2024 and sell it today you would earn a total of  2,381  from holding CVS Health Corp or generate 54.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Amedisys  vs.  CVS Health Corp

Amedisys

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Amedisys are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Amedisys is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, CVS Health unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amedisys and CVS Health

The main advantage of trading using opposite Amedisys and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amedisys 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 Amedisys and CVS Health Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.