Correlation Between D Box and CVS HEALTH

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

By analyzing existing cross correlation between D Box Technologies and CVS HEALTH CDR, you can compare the effects of market volatilities on D Box and CVS HEALTH 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 D Box with a short position of CVS HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of D Box and CVS HEALTH.

Diversification Opportunities for D Box and CVS HEALTH

-0.7

Correlation Coefficient

D Box  CVS HEALTH

Excellent diversification

The 3 months correlation between DBO and CVS is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding D Box Technologies and CVS HEALTH CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH CDR and D Box 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 D Box Technologies are associated (or correlated) with CVS HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS HEALTH CDR has no effect on the direction of D Box i.e., D Box and CVS HEALTH go up and down completely randomly.

Pair Corralation between D Box and CVS HEALTH

Assuming the 90 days trading horizon D Box Technologies is expected to generate 2.14 times more return on investment than CVS HEALTH. However, D Box is 2.14 times more volatile than CVS HEALTH CDR. It trades about 0.14 of its potential returns per unit of risk. CVS HEALTH CDR is currently generating about -0.55 per unit of risk. If you would invest  14.00  in D Box Technologies on September 26, 2024 and sell it today you would earn a total of  2.00  from holding D Box Technologies or generate 14.29% return on investment over 90 days.

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

D Box Technologies  vs.  CVS HEALTH CDR

D Box Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in D Box Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, D Box displayed solid returns over the last few months and may actually be approaching a breakup point.

CVS HEALTH CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS HEALTH CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with D Box and CVS HEALTH

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

The idea behind D Box Technologies and CVS HEALTH CDR 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.