Correlation Between CVS Health and LivaNova PLC

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

Diversification Opportunities for CVS Health and LivaNova PLC

0.76

Correlation Coefficient

CVS Health  LivaNova PLC

Poor diversification

The 3 months correlation between CVS and LivaNova is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and LivaNova PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LivaNova PLC 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 LivaNova PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LivaNova PLC has no effect on the direction of CVS Health i.e., CVS Health and LivaNova PLC go up and down completely randomly.

Pair Corralation between CVS Health and LivaNova PLC

Considering the 90-day investment horizon CVS Health Corp is expected to under-perform the LivaNova PLC. In addition to that, CVS Health is 1.64 times more volatile than LivaNova PLC. It trades about -0.5 of its total potential returns per unit of risk. LivaNova PLC is currently generating about -0.3 per unit of volatility. If you would invest  5,119  in LivaNova PLC on October 5, 2024 and sell it today you would lose (488.00) from holding LivaNova PLC or give up 9.53% of portfolio value over 90 days.

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

CVS Health Corp  vs.  LivaNova PLC

CVS Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health Corp 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 comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

LivaNova PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LivaNova PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with CVS Health and LivaNova PLC

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

The idea behind CVS Health Corp and LivaNova PLC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.