Correlation Between CVS Health and Travelers Companies
Can any of the company-specific risk be diversified away by investing in both CVS Health and Travelers Companies 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 Travelers Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and The Travelers Companies, you can compare the effects of market volatilities on CVS Health and Travelers Companies 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 Travelers Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Travelers Companies.
Diversification Opportunities for CVS Health and Travelers Companies
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CVS and Travelers is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and The Travelers Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Travelers Companies 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 Travelers Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Travelers Companies has no effect on the direction of CVS Health i.e., CVS Health and Travelers Companies go up and down completely randomly.
Pair Corralation between CVS Health and Travelers Companies
Assuming the 90 days trading horizon CVS Health is expected to under-perform the Travelers Companies. In addition to that, CVS Health is 1.05 times more volatile than The Travelers Companies. It trades about -0.05 of its total potential returns per unit of risk. The Travelers Companies is currently generating about 0.05 per unit of volatility. If you would invest 350,187 in The Travelers Companies on September 26, 2024 and sell it today you would earn a total of 175,062 from holding The Travelers Companies or generate 49.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
CVS Health vs. The Travelers Companies
Performance |
Timeline |
CVS Health |
The Travelers Companies |
CVS Health and Travelers Companies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CVS Health and Travelers Companies
The main advantage of trading using opposite CVS Health and Travelers Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Travelers Companies 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 Travelers Companies will offset losses from the drop in Travelers Companies' long position.CVS Health vs. Grupo Sports World | CVS Health vs. KB Home | CVS Health vs. Verizon Communications | CVS Health vs. United States Steel |
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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 Stocks Directory module to find actively traded stocks across global markets.
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