Correlation Between CVS Health and Xilio Development

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

Diversification Opportunities for CVS Health and Xilio Development

-0.4

Correlation Coefficient

CVS Health  Xilio Development

Very good diversification

The 3 months correlation between CVS and Xilio is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Xilio Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xilio Development 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 Xilio Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xilio Development has no effect on the direction of CVS Health i.e., CVS Health and Xilio Development go up and down completely randomly.

Pair Corralation between CVS Health and Xilio Development

Considering the 90-day investment horizon CVS Health Corp is expected to under-perform the Xilio Development. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health Corp is 3.72 times less risky than Xilio Development. The stock trades about -0.36 of its potential returns per unit of risk. The Xilio Development is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  108.00  in Xilio Development on October 8, 2024 and sell it today you would earn a total of  2.00  from holding Xilio Development or generate 1.85% return on investment over 90 days.

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

CVS Health Corp  vs.  Xilio Development

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.

Xilio Development

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xilio Development are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Xilio Development displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS Health and Xilio Development

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

The idea behind CVS Health Corp and Xilio Development 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.