Correlation Between CVS Health and Nevro Corp

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

Diversification Opportunities for CVS Health and Nevro Corp

0.51

Correlation Coefficient

CVS Health  Nevro Corp

Very weak diversification

The 3 months correlation between CVS and Nevro is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Nevro Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nevro Corp 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 Nevro Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nevro Corp has no effect on the direction of CVS Health i.e., CVS Health and Nevro Corp go up and down completely randomly.

Pair Corralation between CVS Health and Nevro Corp

Considering the 90-day investment horizon CVS Health Corp is expected to under-perform the Nevro Corp. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health Corp is 1.38 times less risky than Nevro Corp. The stock trades about -0.46 of its potential returns per unit of risk. The Nevro Corp is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  407.00  in Nevro Corp on October 6, 2024 and sell it today you would lose (36.00) from holding Nevro Corp or give up 8.85% of portfolio value over 90 days.

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

CVS Health Corp  vs.  Nevro Corp

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 fragile 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.

Nevro Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nevro Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with CVS Health and Nevro Corp

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

The idea behind CVS Health Corp and Nevro Corp 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.