Correlation Between CVS HEALTH and Monument Mining

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

Diversification Opportunities for CVS HEALTH and Monument Mining

0.71

Correlation Coefficient

CVS HEALTH  Monument Mining

Poor diversification

The 3 months correlation between CVS and Monument is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Monument Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monument Mining 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 Monument Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monument Mining has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Monument Mining go up and down completely randomly.

Pair Corralation between CVS HEALTH and Monument Mining

Assuming the 90 days trading horizon CVS HEALTH is expected to generate 1.05 times less return on investment than Monument Mining. But when comparing it to its historical volatility, CVS HEALTH CDR is 1.41 times less risky than Monument Mining. It trades about 0.27 of its potential returns per unit of risk. Monument Mining Limited is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  28.00  in Monument Mining Limited on December 30, 2024 and sell it today you would earn a total of  15.00  from holding Monument Mining Limited or generate 53.57% return on investment over 90 days.

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

CVS HEALTH CDR  vs.  Monument Mining Limited

CVS HEALTH CDR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CVS HEALTH CDR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CVS HEALTH displayed solid returns over the last few months and may actually be approaching a breakup point.

Monument Mining

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Monument Mining Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Monument Mining showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS HEALTH and Monument Mining

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

The idea behind CVS HEALTH CDR and Monument Mining Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.