Correlation Between Dillards and CVS Health

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

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

Diversification Opportunities for Dillards and CVS Health

-0.63

Correlation Coefficient

Dillards  CVS Health

Excellent diversification

The 3 months correlation between Dillards and CVS is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Dillards and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Dillards 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 Dillards 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 has no effect on the direction of Dillards i.e., Dillards and CVS Health go up and down completely randomly.

Pair Corralation between Dillards and CVS Health

Assuming the 90 days trading horizon Dillards is expected to generate 0.97 times more return on investment than CVS Health. However, Dillards is 1.03 times less risky than CVS Health. It trades about 0.25 of its potential returns per unit of risk. CVS Health is currently generating about -0.33 per unit of risk. If you would invest  38,969  in Dillards on October 7, 2024 and sell it today you would earn a total of  4,631  from holding Dillards or generate 11.88% return on investment over 90 days.

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

Dillards  vs.  CVS Health

Dillards

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dillards are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dillards reported solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Dillards and CVS Health

The main advantage of trading using opposite Dillards and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dillards 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 Dillards and CVS Health 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.