Correlation Between CVS Health and WIMFARM SA

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

By analyzing existing cross correlation between CVS Health and WIMFARM SA EO, you can compare the effects of market volatilities on CVS Health and WIMFARM SA 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 WIMFARM SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and WIMFARM SA.

Diversification Opportunities for CVS Health and WIMFARM SA

0.26

Correlation Coefficient

CVS Health  WIMFARM SA

Modest diversification

The 3 months correlation between CVS and WIMFARM is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and WIMFARM SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIMFARM SA EO 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 WIMFARM SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIMFARM SA EO has no effect on the direction of CVS Health i.e., CVS Health and WIMFARM SA go up and down completely randomly.

Pair Corralation between CVS Health and WIMFARM SA

Assuming the 90 days trading horizon CVS Health is expected to under-perform the WIMFARM SA. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health is 1.51 times less risky than WIMFARM SA. The stock trades about -0.54 of its potential returns per unit of risk. The WIMFARM SA EO is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  323.00  in WIMFARM SA EO on September 27, 2024 and sell it today you would lose (8.00) from holding WIMFARM SA EO or give up 2.48% of portfolio value over 90 days.

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

CVS Health  vs.  WIMFARM SA EO

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

WIMFARM SA EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WIMFARM SA EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CVS Health and WIMFARM SA

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

The idea behind CVS Health and WIMFARM SA EO 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.