Correlation Between CVS Health and APPLIED MATERIALS

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

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

Diversification Opportunities for CVS Health and APPLIED MATERIALS

0.47

Correlation Coefficient

CVS Health  APPLIED MATERIALS

Very weak diversification

The 3 months correlation between CVS and APPLIED is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS 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 APPLIED MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLIED MATERIALS has no effect on the direction of CVS Health i.e., CVS Health and APPLIED MATERIALS go up and down completely randomly.

Pair Corralation between CVS Health and APPLIED MATERIALS

Assuming the 90 days trading horizon CVS Health is expected to generate 1.09 times more return on investment than APPLIED MATERIALS. However, CVS Health is 1.09 times more volatile than APPLIED MATERIALS. It trades about 0.05 of its potential returns per unit of risk. APPLIED MATERIALS is currently generating about 0.02 per unit of risk. If you would invest  5,235  in CVS Health on September 4, 2024 and sell it today you would earn a total of  398.00  from holding CVS Health or generate 7.6% return on investment over 90 days.

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

CVS Health  vs.  APPLIED MATERIALS

CVS Health

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

APPLIED MATERIALS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in APPLIED MATERIALS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, APPLIED MATERIALS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CVS Health and APPLIED MATERIALS

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

The idea behind CVS Health and APPLIED MATERIALS 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.