Correlation Between CVS HEALTH and Capstone Mining

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

By analyzing existing cross correlation between CVS HEALTH CDR and Capstone Mining Corp, you can compare the effects of market volatilities on CVS HEALTH and Capstone Mining 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 Capstone Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS HEALTH and Capstone Mining.

Diversification Opportunities for CVS HEALTH and Capstone Mining

0.76

Correlation Coefficient

CVS HEALTH  Capstone Mining

Poor diversification

The 3 months correlation between CVS and Capstone is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Capstone Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Mining Corp 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 CDR are associated (or correlated) with Capstone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Mining Corp has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Capstone Mining go up and down completely randomly.

Pair Corralation between CVS HEALTH and Capstone Mining

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the Capstone Mining. In addition to that, CVS HEALTH is 1.25 times more volatile than Capstone Mining Corp. It trades about -0.2 of its total potential returns per unit of risk. Capstone Mining Corp is currently generating about -0.11 per unit of volatility. If you would invest  1,073  in Capstone Mining Corp on October 10, 2024 and sell it today you would lose (174.00) from holding Capstone Mining Corp or give up 16.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

CVS HEALTH CDR  vs.  Capstone Mining Corp

CVS HEALTH CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS HEALTH CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Capstone Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capstone Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with CVS HEALTH and Capstone Mining

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

The idea behind CVS HEALTH CDR and Capstone Mining Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.