Correlation Between Bip Investment and CVS HEALTH

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

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

Diversification Opportunities for Bip Investment and CVS HEALTH

-0.38

Correlation Coefficient

Bip Investment  CVS HEALTH

Very good diversification

The 3 months correlation between Bip and CVS is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Bip Investment Corp and CVS HEALTH CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH CDR and Bip Investment 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 Bip Investment Corp 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 CDR has no effect on the direction of Bip Investment i.e., Bip Investment and CVS HEALTH go up and down completely randomly.

Pair Corralation between Bip Investment and CVS HEALTH

Assuming the 90 days trading horizon Bip Investment Corp is expected to generate 0.53 times more return on investment than CVS HEALTH. However, Bip Investment Corp is 1.87 times less risky than CVS HEALTH. It trades about 0.04 of its potential returns per unit of risk. CVS HEALTH CDR is currently generating about -0.06 per unit of risk. If you would invest  2,224  in Bip Investment Corp on September 26, 2024 and sell it today you would earn a total of  436.00  from holding Bip Investment Corp or generate 19.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bip Investment Corp  vs.  CVS HEALTH CDR

Bip Investment Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bip Investment Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Bip Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CVS HEALTH CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS HEALTH CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Bip Investment and CVS HEALTH

The main advantage of trading using opposite Bip Investment and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bip Investment 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 Bip Investment Corp and CVS HEALTH CDR 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.