Correlation Between Gold Road and CVS Health

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

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

Diversification Opportunities for Gold Road and CVS Health

-0.62

Correlation Coefficient

Gold Road  CVS Health

Excellent diversification

The 3 months correlation between Gold and CVS is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Gold Road Resources and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Gold Road 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 Gold Road Resources 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 Gold Road i.e., Gold Road and CVS Health go up and down completely randomly.

Pair Corralation between Gold Road and CVS Health

Assuming the 90 days horizon Gold Road Resources is expected to generate 0.55 times more return on investment than CVS Health. However, Gold Road Resources is 1.8 times less risky than CVS Health. It trades about -0.11 of its potential returns per unit of risk. CVS Health is currently generating about -0.33 per unit of risk. If you would invest  130.00  in Gold Road Resources on October 11, 2024 and sell it today you would lose (4.00) from holding Gold Road Resources or give up 3.08% of portfolio value over 90 days.

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

Gold Road Resources  vs.  CVS Health

Gold Road Resources

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Road Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Gold Road 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 fragile 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 Gold Road and CVS Health

The main advantage of trading using opposite Gold Road and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Road 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 Gold Road Resources 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.