Correlation Between CVS Health and Tenon Medical

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

Diversification Opportunities for CVS Health and Tenon Medical

0.71

Correlation Coefficient

CVS Health  Tenon Medical

Poor diversification

The 3 months correlation between CVS and Tenon is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Tenon Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tenon Medical 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 Tenon Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tenon Medical has no effect on the direction of CVS Health i.e., CVS Health and Tenon Medical go up and down completely randomly.

Pair Corralation between CVS Health and Tenon Medical

Considering the 90-day investment horizon CVS Health Corp is expected to under-perform the Tenon Medical. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health Corp is 1.67 times less risky than Tenon Medical. The stock trades about -0.46 of its potential returns per unit of risk. The Tenon Medical is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  221.00  in Tenon Medical on October 6, 2024 and sell it today you would lose (3.00) from holding Tenon Medical or give up 1.36% 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.  Tenon Medical

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.

Tenon Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tenon Medical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady 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 Tenon Medical

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

The idea behind CVS Health Corp and Tenon Medical 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.