Correlation Between CVS Health and HOYA

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

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

Diversification Opportunities for CVS Health and HOYA

0.56

Correlation Coefficient

CVS Health  HOYA

Very weak diversification

The 3 months correlation between CVS and HOYA is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and HOYA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOYA 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 HOYA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOYA has no effect on the direction of CVS Health i.e., CVS Health and HOYA go up and down completely randomly.

Pair Corralation between CVS Health and HOYA

Assuming the 90 days trading horizon CVS Health is expected to under-perform the HOYA. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health is 3.65 times less risky than HOYA. The stock trades about -0.02 of its potential returns per unit of risk. The HOYA Corporation is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,087  in HOYA Corporation on September 7, 2024 and sell it today you would earn a total of  9,588  from holding HOYA Corporation or generate 310.59% 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.  HOYA Corp.

CVS Health

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HOYA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HOYA Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HOYA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS Health and HOYA

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

The idea behind CVS Health and HOYA Corporation 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.