Correlation Between Bright Health and CVS Health

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

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

Diversification Opportunities for Bright Health and CVS Health

0.0

Correlation Coefficient

Bright Health  CVS Health

Pay attention - limited upside

The 3 months correlation between Bright and CVS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bright Health Group 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 Bright 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 Bright Health Group 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 Bright Health i.e., Bright Health and CVS Health go up and down completely randomly.

Pair Corralation between Bright Health and CVS Health

If you would invest  4,436  in CVS Health Corp on December 26, 2024 and sell it today you would earn a total of  2,284  from holding CVS Health Corp or generate 51.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Bright Health Group  vs.  CVS Health Corp

Bright Health Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bright Health Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Bright Health is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 21 (%) 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 Bright Health and CVS Health

The main advantage of trading using opposite Bright Health and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bright Health 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 Bright Health Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.