Correlation Between CVS Health and Akebia Ther

Can any of the company-specific risk be diversified away by investing in both CVS Health and Akebia Ther 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 Akebia Ther into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVS Health Corp and Akebia Ther, you can compare the effects of market volatilities on CVS Health and Akebia Ther 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 Akebia Ther. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Akebia Ther.

Diversification Opportunities for CVS Health and Akebia Ther

0.21

Correlation Coefficient

CVS Health  Akebia Ther

Modest diversification

The 3 months correlation between CVS and Akebia is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Akebia Ther in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akebia Ther 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 Corp are associated (or correlated) with Akebia Ther. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akebia Ther has no effect on the direction of CVS Health i.e., CVS Health and Akebia Ther go up and down completely randomly.

Pair Corralation between CVS Health and Akebia Ther

Considering the 90-day investment horizon CVS Health Corp is expected to generate 0.37 times more return on investment than Akebia Ther. However, CVS Health Corp is 2.7 times less risky than Akebia Ther. It trades about 0.28 of its potential returns per unit of risk. Akebia Ther is currently generating about 0.03 per unit of risk. If you would invest  4,393  in CVS Health Corp on December 27, 2024 and sell it today you would earn a total of  2,327  from holding CVS Health Corp or generate 52.97% return on investment over 90 days.

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

CVS Health Corp  vs.  Akebia Ther

CVS Health Corp

Risk-Adjusted Performance

Solid

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

Akebia Ther

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Akebia Ther are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Akebia Ther sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS Health and Akebia Ther

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

The idea behind CVS Health Corp and Akebia Ther 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.

Check out your portfolio center.

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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.