Correlation Between CVS HEALTH and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both CVS HEALTH and Meta Platforms 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 Meta Platforms 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 Meta Platforms CDR, you can compare the effects of market volatilities on CVS HEALTH and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS HEALTH and Meta Platforms.
Diversification Opportunities for CVS HEALTH and Meta Platforms
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CVS and Meta is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Meta Platforms CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms CDR has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Meta Platforms go up and down completely randomly.
Pair Corralation between CVS HEALTH and Meta Platforms
Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the Meta Platforms. But the stock apears to be less risky and, when comparing its historical volatility, CVS HEALTH CDR is 1.22 times less risky than Meta Platforms. The stock trades about -0.06 of its potential returns per unit of risk. The Meta Platforms CDR is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 726.00 in Meta Platforms CDR on September 26, 2024 and sell it today you would earn a total of 2,644 from holding Meta Platforms CDR or generate 364.19% 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. Meta Platforms CDR
Performance |
Timeline |
CVS HEALTH CDR |
Meta Platforms CDR |
CVS HEALTH and Meta Platforms Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CVS HEALTH and Meta Platforms
The main advantage of trading using opposite CVS HEALTH and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS HEALTH position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.CVS HEALTH vs. Nicola Mining | CVS HEALTH vs. Westshore Terminals Investment | CVS HEALTH vs. Canlan Ice Sports | CVS HEALTH vs. Bip Investment Corp |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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