Correlation Between Bumrungrad Hospital and CVS Health

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

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

Diversification Opportunities for Bumrungrad Hospital and CVS Health

-0.26

Correlation Coefficient

Bumrungrad Hospital  CVS Health

Very good diversification

The 3 months correlation between Bumrungrad and CVS is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Bumrungrad Hospital Public and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Bumrungrad Hospital 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 Bumrungrad Hospital Public 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 Bumrungrad Hospital i.e., Bumrungrad Hospital and CVS Health go up and down completely randomly.

Pair Corralation between Bumrungrad Hospital and CVS Health

Assuming the 90 days trading horizon Bumrungrad Hospital is expected to generate 11.02 times less return on investment than CVS Health. But when comparing it to its historical volatility, Bumrungrad Hospital Public is 1.14 times less risky than CVS Health. It trades about 0.01 of its potential returns per unit of risk. CVS Health is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,550  in CVS Health on December 1, 2024 and sell it today you would earn a total of  722.00  from holding CVS Health or generate 13.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Bumrungrad Hospital Public  vs.  CVS Health

Bumrungrad Hospital

Risk-Adjusted Performance

Very Weak

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

CVS Health

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CVS Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bumrungrad Hospital and CVS Health

The main advantage of trading using opposite Bumrungrad Hospital and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bumrungrad Hospital 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 Bumrungrad Hospital Public 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.