Correlation Between CVS Health and First Majestic

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

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

Diversification Opportunities for CVS Health and First Majestic

0.69

Correlation Coefficient

CVS Health  First Majestic

Poor diversification

The 3 months correlation between CVS and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and First Majestic Silver in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Majestic Silver 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 First Majestic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Majestic Silver has no effect on the direction of CVS Health i.e., CVS Health and First Majestic go up and down completely randomly.

Pair Corralation between CVS Health and First Majestic

Assuming the 90 days trading horizon CVS Health is expected to under-perform the First Majestic. In addition to that, CVS Health is 2.88 times more volatile than First Majestic Silver. It trades about -0.31 of its total potential returns per unit of risk. First Majestic Silver is currently generating about -0.19 per unit of volatility. If you would invest  47,972  in First Majestic Silver on October 11, 2024 and sell it today you would lose (1,792) from holding First Majestic Silver or give up 3.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

CVS Health  vs.  First Majestic Silver

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

First Majestic Silver

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Majestic Silver has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with CVS Health and First Majestic

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

The idea behind CVS Health and First Majestic Silver 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.