Correlation Between CVS HEALTH and GOLDMAN SACHS

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

Diversification Opportunities for CVS HEALTH and GOLDMAN SACHS

-0.11

Correlation Coefficient

CVS HEALTH  GOLDMAN SACHS

Good diversification

The 3 months correlation between CVS and GOLDMAN is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and GOLDMAN SACHS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLDMAN SACHS CDR 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 GOLDMAN SACHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLDMAN SACHS CDR has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and GOLDMAN SACHS go up and down completely randomly.

Pair Corralation between CVS HEALTH and GOLDMAN SACHS

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the GOLDMAN SACHS. In addition to that, CVS HEALTH is 1.24 times more volatile than GOLDMAN SACHS CDR. It trades about -0.02 of its total potential returns per unit of risk. GOLDMAN SACHS CDR is currently generating about 0.16 per unit of volatility. If you would invest  2,569  in GOLDMAN SACHS CDR on October 23, 2024 and sell it today you would earn a total of  635.00  from holding GOLDMAN SACHS CDR or generate 24.72% 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.  GOLDMAN SACHS CDR

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 very healthy basic indicators, CVS HEALTH is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

GOLDMAN SACHS CDR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GOLDMAN SACHS CDR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, GOLDMAN SACHS displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS HEALTH and GOLDMAN SACHS

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

The idea behind CVS HEALTH CDR and GOLDMAN SACHS CDR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .