Correlation Between CVS Health and NRX Pharmaceuticals

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

Diversification Opportunities for CVS Health and NRX Pharmaceuticals

-0.22

Correlation Coefficient

CVS Health  NRX Pharmaceuticals

Very good diversification

The 3 months correlation between CVS and NRX is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and NRX Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRX Pharmaceuticals 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 NRX Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRX Pharmaceuticals has no effect on the direction of CVS Health i.e., CVS Health and NRX Pharmaceuticals go up and down completely randomly.

Pair Corralation between CVS Health and NRX Pharmaceuticals

Considering the 90-day investment horizon CVS Health is expected to generate 7.35 times less return on investment than NRX Pharmaceuticals. But when comparing it to its historical volatility, CVS Health Corp is 8.5 times less risky than NRX Pharmaceuticals. It trades about 0.46 of its potential returns per unit of risk. NRX Pharmaceuticals is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  142.00  in NRX Pharmaceuticals on October 23, 2024 and sell it today you would earn a total of  259.00  from holding NRX Pharmaceuticals or generate 182.39% return on investment over 90 days.

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

CVS Health Corp  vs.  NRX Pharmaceuticals

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 comparatively stable basic indicators, CVS Health is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

NRX Pharmaceuticals

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NRX Pharmaceuticals are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, NRX Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS Health and NRX Pharmaceuticals

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

The idea behind CVS Health Corp and NRX Pharmaceuticals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.