Correlation Between CVS HEALTH and Sienna Senior

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

Diversification Opportunities for CVS HEALTH and Sienna Senior

-0.01

Correlation Coefficient

CVS HEALTH  Sienna Senior

Good diversification

The 3 months correlation between CVS and Sienna is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Sienna Senior Living in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sienna Senior Living 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 Sienna Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sienna Senior Living has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Sienna Senior go up and down completely randomly.

Pair Corralation between CVS HEALTH and Sienna Senior

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the Sienna Senior. In addition to that, CVS HEALTH is 2.35 times more volatile than Sienna Senior Living. It trades about -0.35 of its total potential returns per unit of risk. Sienna Senior Living is currently generating about -0.07 per unit of volatility. If you would invest  1,653  in Sienna Senior Living on September 18, 2024 and sell it today you would lose (27.00) from holding Sienna Senior Living or give up 1.63% of portfolio value over 90 days.

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

CVS HEALTH CDR  vs.  Sienna Senior Living

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.

Sienna Senior Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sienna Senior Living has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Sienna Senior is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CVS HEALTH and Sienna Senior

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

The idea behind CVS HEALTH CDR and Sienna Senior Living 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.