Correlation Between CVS HEALTH and Dexterra

Can any of the company-specific risk be diversified away by investing in both CVS HEALTH and Dexterra 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 Dexterra 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 Dexterra Group, you can compare the effects of market volatilities on CVS HEALTH and Dexterra 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 Dexterra. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS HEALTH and Dexterra.

Diversification Opportunities for CVS HEALTH and Dexterra

-0.31

Correlation Coefficient

CVS HEALTH  Dexterra

Very good diversification

The 3 months correlation between CVS and Dexterra is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Dexterra Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dexterra Group 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 Dexterra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dexterra Group has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Dexterra go up and down completely randomly.

Pair Corralation between CVS HEALTH and Dexterra

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the Dexterra. In addition to that, CVS HEALTH is 2.12 times more volatile than Dexterra Group. It trades about -0.41 of its total potential returns per unit of risk. Dexterra Group is currently generating about 0.58 per unit of volatility. If you would invest  653.00  in Dexterra Group on September 19, 2024 and sell it today you would earn a total of  110.00  from holding Dexterra Group or generate 16.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

CVS HEALTH CDR  vs.  Dexterra Group

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 unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Dexterra Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dexterra Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Dexterra may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CVS HEALTH and Dexterra

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

The idea behind CVS HEALTH CDR and Dexterra Group 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.