Correlation Between CVS Health and ONWARD MEDICAL

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

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

Diversification Opportunities for CVS Health and ONWARD MEDICAL

0.03

Correlation Coefficient

CVS Health  ONWARD MEDICAL

Significant diversification

The 3 months correlation between CVS and ONWARD is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and ONWARD MEDICAL BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONWARD MEDICAL BV and CVS Health 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 CVS Health are associated (or correlated) with ONWARD MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONWARD MEDICAL BV has no effect on the direction of CVS Health i.e., CVS Health and ONWARD MEDICAL go up and down completely randomly.

Pair Corralation between CVS Health and ONWARD MEDICAL

Assuming the 90 days trading horizon CVS Health is expected to under-perform the ONWARD MEDICAL. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health is 2.75 times less risky than ONWARD MEDICAL. The stock trades about -0.03 of its potential returns per unit of risk. The ONWARD MEDICAL BV is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  409.00  in ONWARD MEDICAL BV on October 4, 2024 and sell it today you would earn a total of  171.00  from holding ONWARD MEDICAL BV or generate 41.81% return on investment over 90 days.

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

CVS Health  vs.  ONWARD MEDICAL BV

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

ONWARD MEDICAL BV

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ONWARD MEDICAL BV are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ONWARD MEDICAL reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS Health and ONWARD MEDICAL

The main advantage of trading using opposite CVS Health and ONWARD MEDICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, ONWARD MEDICAL 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 ONWARD MEDICAL will offset losses from the drop in ONWARD MEDICAL's long position.

The idea behind CVS Health and ONWARD MEDICAL BV 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.