Correlation Between CVS Health and Beyond Meat

Can any of the company-specific risk be diversified away by investing in both CVS Health and Beyond Meat 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 Beyond Meat into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CVS Health and Beyond Meat, you can compare the effects of market volatilities on CVS Health and Beyond Meat 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 Beyond Meat. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Beyond Meat.

Diversification Opportunities for CVS Health and Beyond Meat

0.62

Correlation Coefficient

CVS Health  Beyond Meat

Poor diversification

The 3 months correlation between CVS and Beyond is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Beyond Meat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beyond Meat 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 are associated (or correlated) with Beyond Meat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beyond Meat has no effect on the direction of CVS Health i.e., CVS Health and Beyond Meat go up and down completely randomly.

Pair Corralation between CVS Health and Beyond Meat

Assuming the 90 days trading horizon CVS Health is expected to generate 0.57 times more return on investment than Beyond Meat. However, CVS Health is 1.76 times less risky than Beyond Meat. It trades about -0.04 of its potential returns per unit of risk. Beyond Meat is currently generating about -0.05 per unit of risk. If you would invest  3,262  in CVS Health on September 30, 2024 and sell it today you would lose (508.00) from holding CVS Health or give up 15.57% of portfolio value over 90 days.

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

CVS Health  vs.  Beyond Meat

CVS Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Beyond Meat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beyond Meat has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CVS Health and Beyond Meat

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

The idea behind CVS Health and Beyond Meat 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.