Correlation Between CVS Health and STRATA Skin

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

Diversification Opportunities for CVS Health and STRATA Skin

-0.8

Correlation Coefficient

CVS Health  STRATA Skin

Pay attention - limited upside

The 3 months correlation between CVS and STRATA is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and STRATA Skin Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRATA Skin Sciences 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 STRATA Skin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRATA Skin Sciences has no effect on the direction of CVS Health i.e., CVS Health and STRATA Skin go up and down completely randomly.

Pair Corralation between CVS Health and STRATA Skin

Considering the 90-day investment horizon CVS Health Corp is expected to generate 0.76 times more return on investment than STRATA Skin. However, CVS Health Corp is 1.32 times less risky than STRATA Skin. It trades about 0.29 of its potential returns per unit of risk. STRATA Skin Sciences 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  2,366  from holding CVS Health Corp or generate 53.86% return on investment over 90 days.

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

CVS Health Corp  vs.  STRATA Skin Sciences

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.

STRATA Skin Sciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days STRATA Skin Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, STRATA Skin is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CVS Health and STRATA Skin

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

The idea behind CVS Health Corp and STRATA Skin Sciences 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.