Correlation Between Computer Modelling and CVS HEALTH

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

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

Diversification Opportunities for Computer Modelling and CVS HEALTH

0.35

Correlation Coefficient

Computer Modelling  CVS HEALTH

Weak diversification

The 3 months correlation between Computer and CVS is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Computer Modelling Group 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 Computer Modelling 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 Computer Modelling 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 CDR has no effect on the direction of Computer Modelling i.e., Computer Modelling and CVS HEALTH go up and down completely randomly.

Pair Corralation between Computer Modelling and CVS HEALTH

Assuming the 90 days trading horizon Computer Modelling Group is expected to generate 0.82 times more return on investment than CVS HEALTH. However, Computer Modelling Group is 1.21 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 -0.42 per unit of risk. If you would invest  1,002  in Computer Modelling Group on September 21, 2024 and sell it today you would earn a total of  65.00  from holding Computer Modelling Group or generate 6.49% return on investment over 90 days.

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

Computer Modelling Group  vs.  CVS HEALTH CDR

Computer Modelling

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer Modelling Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Computer Modelling is not utilizing all of its potentials. The recent stock price disarray, 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 unfluctuating 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 Computer Modelling and CVS HEALTH

The main advantage of trading using opposite Computer Modelling and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Computer Modelling 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 Computer Modelling Group 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.

Check out your portfolio center.

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.