Correlation Between CVS HEALTH and Walmart

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

Diversification Opportunities for CVS HEALTH and Walmart

-0.04

Correlation Coefficient

CVS HEALTH  Walmart

Good diversification

The 3 months correlation between CVS and Walmart is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding CVS HEALTH CDR and Walmart Inc CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart Inc CDR 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart Inc CDR has no effect on the direction of CVS HEALTH i.e., CVS HEALTH and Walmart go up and down completely randomly.

Pair Corralation between CVS HEALTH and Walmart

Assuming the 90 days trading horizon CVS HEALTH CDR is expected to generate 1.32 times more return on investment than Walmart. However, CVS HEALTH is 1.32 times more volatile than Walmart Inc CDR. It trades about 0.27 of its potential returns per unit of risk. Walmart Inc CDR is currently generating about -0.04 per unit of risk. If you would invest  1,080  in CVS HEALTH CDR on December 30, 2024 and sell it today you would earn a total of  579.00  from holding CVS HEALTH CDR or generate 53.61% 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.  Walmart Inc CDR

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 21 (%) 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.

Walmart Inc CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart Inc CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Walmart is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CVS HEALTH and Walmart

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

The idea behind CVS HEALTH CDR and Walmart Inc CDR 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.