Correlation Between CVS Health and GP Investments

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

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

Diversification Opportunities for CVS Health and GP Investments

-0.02

Correlation Coefficient

CVS Health  GP Investments

Good diversification

The 3 months correlation between CVS and GPIV33 is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and GP Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GP Investments 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 GP Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GP Investments has no effect on the direction of CVS Health i.e., CVS Health and GP Investments go up and down completely randomly.

Pair Corralation between CVS Health and GP Investments

If you would invest  400.00  in GP Investments on September 25, 2024 and sell it today you would lose (7.00) from holding GP Investments or give up 1.75% of portfolio value over 90 days.

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

CVS Health  vs.  GP Investments

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

GP Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GP Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, GP Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CVS Health and GP Investments

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

The idea behind CVS Health and GP Investments 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..