Correlation Between CVS HEALTH and Wescan Goldfields

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

Diversification Opportunities for CVS HEALTH and Wescan Goldfields

-0.2

Correlation Coefficient

CVS HEALTH  Wescan Goldfields

Good diversification

The 3 months correlation between CVS and Wescan is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Wescan Goldfields in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wescan Goldfields 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 Wescan Goldfields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wescan Goldfields has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Wescan Goldfields go up and down completely randomly.

Pair Corralation between CVS HEALTH and Wescan Goldfields

Assuming the 90 days trading horizon CVS HEALTH is expected to generate 4.05 times less return on investment than Wescan Goldfields. But when comparing it to its historical volatility, CVS HEALTH CDR is 12.03 times less risky than Wescan Goldfields. It trades about 0.49 of its potential returns per unit of risk. Wescan Goldfields is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Wescan Goldfields on October 24, 2024 and sell it today you would earn a total of  1.00  from holding Wescan Goldfields or generate 50.0% return on investment over 90 days.

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

CVS HEALTH CDR  vs.  Wescan Goldfields

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.

Wescan Goldfields

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wescan Goldfields are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Wescan Goldfields showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS HEALTH and Wescan Goldfields

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

The idea behind CVS HEALTH CDR and Wescan Goldfields 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.