Correlation Between CVS HEALTH and WELL Health

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

Diversification Opportunities for CVS HEALTH and WELL Health

-0.63

Correlation Coefficient

CVS HEALTH  WELL Health

Excellent diversification

The 3 months correlation between CVS and WELL is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and WELL Health Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WELL Health Technologies 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 WELL Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WELL Health Technologies has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and WELL Health go up and down completely randomly.

Pair Corralation between CVS HEALTH and WELL Health

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to under-perform the WELL Health. In addition to that, CVS HEALTH is 1.07 times more volatile than WELL Health Technologies. It trades about -0.34 of its total potential returns per unit of risk. WELL Health Technologies is currently generating about 0.61 per unit of volatility. If you would invest  503.00  in WELL Health Technologies on September 20, 2024 and sell it today you would earn a total of  197.00  from holding WELL Health Technologies or generate 39.17% return on investment over 90 days.

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

CVS HEALTH CDR  vs.  WELL Health Technologies

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.

WELL Health Technologies

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WELL Health Technologies are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, WELL Health displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS HEALTH and WELL Health

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

The idea behind CVS HEALTH CDR and WELL Health Technologies 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 Global Correlations module to find global opportunities by holding instruments from different markets.