Correlation Between CVS Health and AMP

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

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

Diversification Opportunities for CVS Health and AMP

-0.41

Correlation Coefficient

CVS Health  AMP

Very good diversification

The 3 months correlation between CVS and AMP is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and AMP Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMP Limited 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 AMP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMP Limited has no effect on the direction of CVS Health i.e., CVS Health and AMP go up and down completely randomly.

Pair Corralation between CVS Health and AMP

Assuming the 90 days trading horizon CVS Health is expected to generate 0.86 times more return on investment than AMP. However, CVS Health is 1.17 times less risky than AMP. It trades about 0.25 of its potential returns per unit of risk. AMP Limited is currently generating about -0.1 per unit of risk. If you would invest  4,188  in CVS Health on December 27, 2024 and sell it today you would earn a total of  2,039  from holding CVS Health or generate 48.69% return on investment over 90 days.

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

CVS Health  vs.  AMP Limited

CVS Health

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, CVS Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

AMP Limited

Risk-Adjusted Performance

Very Weak

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

Pair Trading with CVS Health and AMP

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

The idea behind CVS Health and AMP Limited 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..