Correlation Between CVS Health and Cable One

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

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

Diversification Opportunities for CVS Health and Cable One

-0.11

Correlation Coefficient

CVS Health  Cable One

Good diversification

The 3 months correlation between CVS and Cable is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Cable One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cable One 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 Cable One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cable One has no effect on the direction of CVS Health i.e., CVS Health and Cable One go up and down completely randomly.

Pair Corralation between CVS Health and Cable One

Assuming the 90 days trading horizon CVS Health is expected to generate 1.83 times more return on investment than Cable One. However, CVS Health is 1.83 times more volatile than Cable One. It trades about -0.16 of its potential returns per unit of risk. Cable One is currently generating about -0.39 per unit of risk. If you would invest  3,126  in CVS Health on October 12, 2024 and sell it today you would lose (286.00) from holding CVS Health or give up 9.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

CVS Health  vs.  Cable One

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Cable One

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cable One are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Cable One sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS Health and Cable One

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

The idea behind CVS Health and Cable One 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.