Correlation Between CVS HEALTH and Pasofino Gold

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

Diversification Opportunities for CVS HEALTH and Pasofino Gold

0.55

Correlation Coefficient

CVS HEALTH  Pasofino Gold

Very weak diversification

The 3 months correlation between CVS and Pasofino is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Pasofino Gold Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pasofino Gold Limited 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 Pasofino Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pasofino Gold Limited has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Pasofino Gold go up and down completely randomly.

Pair Corralation between CVS HEALTH and Pasofino Gold

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the Pasofino Gold. But the stock apears to be less risky and, when comparing its historical volatility, CVS HEALTH CDR is 1.53 times less risky than Pasofino Gold. The stock trades about -0.31 of its potential returns per unit of risk. The Pasofino Gold Limited is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  54.00  in Pasofino Gold Limited on October 11, 2024 and sell it today you would lose (3.00) from holding Pasofino Gold Limited or give up 5.56% of portfolio value over 90 days.

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

CVS HEALTH CDR  vs.  Pasofino Gold Limited

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 abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pasofino Gold Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pasofino Gold Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's forward indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with CVS HEALTH and Pasofino Gold

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

The idea behind CVS HEALTH CDR and Pasofino Gold 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.