Correlation Between DRI Healthcare and CVS HEALTH

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

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

Diversification Opportunities for DRI Healthcare and CVS HEALTH

-0.14

Correlation Coefficient

DRI Healthcare  CVS HEALTH

Good diversification

The 3 months correlation between DRI and CVS is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding DRI Healthcare Trust 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 DRI Healthcare 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 DRI Healthcare Trust 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 DRI Healthcare i.e., DRI Healthcare and CVS HEALTH go up and down completely randomly.

Pair Corralation between DRI Healthcare and CVS HEALTH

Assuming the 90 days trading horizon DRI Healthcare Trust is expected to under-perform the CVS HEALTH. But the stock apears to be less risky and, when comparing its historical volatility, DRI Healthcare Trust is 1.04 times less risky than CVS HEALTH. The stock trades about -0.01 of its potential returns per unit of risk. The CVS HEALTH CDR is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,080  in CVS HEALTH CDR on December 28, 2024 and sell it today you would earn a total of  579.00  from holding CVS HEALTH CDR or generate 53.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

DRI Healthcare Trust  vs.  CVS HEALTH CDR

DRI Healthcare Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days DRI Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DRI Healthcare is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

CVS HEALTH CDR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CVS HEALTH CDR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CVS HEALTH displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DRI Healthcare and CVS HEALTH

The main advantage of trading using opposite DRI Healthcare and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DRI Healthcare 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 DRI Healthcare Trust 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..