Correlation Between CVS HEALTH and Homerun Resources

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

Diversification Opportunities for CVS HEALTH and Homerun Resources

0.61

Correlation Coefficient

CVS HEALTH  Homerun Resources

Poor diversification

The 3 months correlation between CVS and Homerun is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Homerun Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homerun Resources 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 Homerun Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homerun Resources has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Homerun Resources go up and down completely randomly.

Pair Corralation between CVS HEALTH and Homerun Resources

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to generate 0.54 times more return on investment than Homerun Resources. However, CVS HEALTH CDR is 1.85 times less risky than Homerun Resources. It trades about -0.11 of its potential returns per unit of risk. Homerun Resources is currently generating about -0.18 per unit of risk. If you would invest  1,497  in CVS HEALTH CDR on October 25, 2024 and sell it today you would lose (179.00) from holding CVS HEALTH CDR or give up 11.96% of portfolio value over 90 days.

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

CVS HEALTH CDR  vs.  Homerun Resources

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 recent stock price disarray, may contribute to short-term losses for the investors.

Homerun Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Homerun Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with CVS HEALTH and Homerun Resources

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

The idea behind CVS HEALTH CDR and Homerun Resources 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.