Correlation Between Credit Acceptance and CVS Health

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

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

Diversification Opportunities for Credit Acceptance and CVS Health

0.0

Correlation Coefficient

Credit Acceptance  CVS Health

Pay attention - limited upside

The 3 months correlation between Credit and CVS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Credit Acceptance and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Credit Acceptance 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 Credit Acceptance 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 Credit Acceptance i.e., Credit Acceptance and CVS Health go up and down completely randomly.

Pair Corralation between Credit Acceptance and CVS Health

If you would invest  32,500  in Credit Acceptance on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Credit Acceptance or generate 0.0% return on investment over 90 days.

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

Credit Acceptance  vs.  CVS Health

Credit Acceptance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Credit Acceptance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Credit Acceptance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CVS Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CVS Health is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Credit Acceptance and CVS Health

The main advantage of trading using opposite Credit Acceptance and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Credit Acceptance 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 Credit Acceptance 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.