Correlation Between CVS HEALTH and Western Metallica

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

Diversification Opportunities for CVS HEALTH and Western Metallica

0.02

Correlation Coefficient

CVS HEALTH  Western Metallica

Significant diversification

The 3 months correlation between CVS and Western is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Western Metallica Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Metallica 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 Western Metallica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Metallica has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Western Metallica go up and down completely randomly.

Pair Corralation between CVS HEALTH and Western Metallica

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to generate 0.19 times more return on investment than Western Metallica. However, CVS HEALTH CDR is 5.16 times less risky than Western Metallica. It trades about 0.28 of its potential returns per unit of risk. Western Metallica Resources is currently generating about 0.03 per unit of risk. If you would invest  1,091  in CVS HEALTH CDR on December 20, 2024 and sell it today you would earn a total of  586.00  from holding CVS HEALTH CDR or generate 53.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

CVS HEALTH CDR  vs.  Western Metallica Resources

CVS HEALTH CDR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CVS HEALTH CDR are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CVS HEALTH displayed solid returns over the last few months and may actually be approaching a breakup point.

Western Metallica

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Metallica Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Western Metallica showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS HEALTH and Western Metallica

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

The idea behind CVS HEALTH CDR and Western Metallica Resources 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.