Correlation Between CVS HEALTH and Sun Lif

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

Diversification Opportunities for CVS HEALTH and Sun Lif

-0.47

Correlation Coefficient

CVS HEALTH  Sun Lif

Very good diversification

The 3 months correlation between CVS and Sun is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Sun Lif Non in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Lif Non 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 Sun Lif. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Lif Non has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Sun Lif go up and down completely randomly.

Pair Corralation between CVS HEALTH and Sun Lif

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to generate 1.84 times more return on investment than Sun Lif. However, CVS HEALTH is 1.84 times more volatile than Sun Lif Non. It trades about 0.54 of its potential returns per unit of risk. Sun Lif Non is currently generating about 0.44 per unit of risk. If you would invest  1,100  in CVS HEALTH CDR on October 23, 2024 and sell it today you would earn a total of  229.00  from holding CVS HEALTH CDR or generate 20.82% return on investment over 90 days.

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

CVS HEALTH CDR  vs.  Sun Lif Non

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.

Sun Lif Non

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Lif Non are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical and fundamental indicators, Sun Lif may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CVS HEALTH and Sun Lif

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

The idea behind CVS HEALTH CDR and Sun Lif Non 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.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.