Correlation Between Chemtrade Logistics and CVS HEALTH

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

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

Diversification Opportunities for Chemtrade Logistics and CVS HEALTH

0.06

Correlation Coefficient

Chemtrade Logistics  CVS HEALTH

Significant diversification

The 3 months correlation between Chemtrade and CVS is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Chemtrade Logistics Income 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 Chemtrade Logistics 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 Chemtrade Logistics Income 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 Chemtrade Logistics i.e., Chemtrade Logistics and CVS HEALTH go up and down completely randomly.

Pair Corralation between Chemtrade Logistics and CVS HEALTH

Assuming the 90 days trading horizon Chemtrade Logistics Income is expected to generate 0.48 times more return on investment than CVS HEALTH. However, Chemtrade Logistics Income is 2.09 times less risky than CVS HEALTH. It trades about 0.14 of its potential returns per unit of risk. CVS HEALTH CDR is currently generating about -0.05 per unit of risk. If you would invest  1,022  in Chemtrade Logistics Income on September 13, 2024 and sell it today you would earn a total of  115.00  from holding Chemtrade Logistics Income or generate 11.25% return on investment over 90 days.

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

Chemtrade Logistics Income  vs.  CVS HEALTH CDR

Chemtrade Logistics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chemtrade Logistics Income are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Chemtrade Logistics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Chemtrade Logistics and CVS HEALTH

The main advantage of trading using opposite Chemtrade Logistics and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemtrade Logistics 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 Chemtrade Logistics Income 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.