Correlation Between CVS Health and Grupo Mexicano

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

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

Diversification Opportunities for CVS Health and Grupo Mexicano

0.84

Correlation Coefficient

CVS Health  Grupo Mexicano

Very poor diversification

The 3 months correlation between CVS and Grupo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Grupo Mexicano de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Mexicano de 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 Grupo Mexicano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Mexicano de has no effect on the direction of CVS Health i.e., CVS Health and Grupo Mexicano go up and down completely randomly.

Pair Corralation between CVS Health and Grupo Mexicano

Assuming the 90 days trading horizon CVS Health is expected to under-perform the Grupo Mexicano. In addition to that, CVS Health is 2.65 times more volatile than Grupo Mexicano de. It trades about -0.33 of its total potential returns per unit of risk. Grupo Mexicano de is currently generating about -0.24 per unit of volatility. If you would invest  1,098  in Grupo Mexicano de on October 8, 2024 and sell it today you would lose (49.00) from holding Grupo Mexicano de or give up 4.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.44%
Values	Daily Returns

CVS Health  vs.  Grupo Mexicano de

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.

Grupo Mexicano de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Mexicano de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental 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 Grupo Mexicano

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

The idea behind CVS Health and Grupo Mexicano de 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.