Correlation Between CVS Health and Marvell Technology

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

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

Diversification Opportunities for CVS Health and Marvell Technology

-0.55

Correlation Coefficient

CVS Health  Marvell Technology

Excellent diversification

The 3 months correlation between CVS and Marvell is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Marvell Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marvell Technology 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 Marvell Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marvell Technology has no effect on the direction of CVS Health i.e., CVS Health and Marvell Technology go up and down completely randomly.

Pair Corralation between CVS Health and Marvell Technology

Assuming the 90 days trading horizon CVS Health is expected to under-perform the Marvell Technology. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health is 1.47 times less risky than Marvell Technology. The stock trades about -0.04 of its potential returns per unit of risk. The Marvell Technology is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,036  in Marvell Technology on September 30, 2024 and sell it today you would earn a total of  2,957  from holding Marvell Technology or generate 73.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

CVS Health  vs.  Marvell Technology

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.

Marvell Technology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marvell Technology are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Marvell Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVS Health and Marvell Technology

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

The idea behind CVS Health and Marvell Technology 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..