Correlation Between CVS Health and Fibra UNO

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

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

Diversification Opportunities for CVS Health and Fibra UNO

0.52

Correlation Coefficient

CVS Health  Fibra UNO

Very weak diversification

The 3 months correlation between CVS and Fibra is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Fibra UNO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fibra UNO 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 Fibra UNO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fibra UNO has no effect on the direction of CVS Health i.e., CVS Health and Fibra UNO go up and down completely randomly.

Pair Corralation between CVS Health and Fibra UNO

Assuming the 90 days trading horizon CVS Health is expected to generate 1.46 times more return on investment than Fibra UNO. However, CVS Health is 1.46 times more volatile than Fibra UNO. It trades about 0.47 of its potential returns per unit of risk. Fibra UNO is currently generating about 0.13 per unit of risk. If you would invest  89,912  in CVS Health on October 26, 2024 and sell it today you would earn a total of  20,288  from holding CVS Health or generate 22.56% 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.  Fibra UNO

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 fairly strong basic indicators, CVS Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fibra UNO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fibra UNO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic 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 Fibra UNO

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

The idea behind CVS Health and Fibra UNO 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.