Correlation Between Edita Food and CVS Health
Can any of the company-specific risk be diversified away by investing in both Edita Food 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 Edita Food and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edita Food Industries and CVS Health Corp, you can compare the effects of market volatilities on Edita Food 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 Edita Food with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edita Food and CVS Health.
Diversification Opportunities for Edita Food and CVS Health
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Edita and CVS is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Edita Food Industries and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp and Edita Food 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 Edita Food Industries 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 Corp has no effect on the direction of Edita Food i.e., Edita Food and CVS Health go up and down completely randomly.
Pair Corralation between Edita Food and CVS Health
Assuming the 90 days trading horizon Edita Food is expected to generate 5.0 times less return on investment than CVS Health. But when comparing it to its historical volatility, Edita Food Industries is 1.62 times less risky than CVS Health. It trades about 0.09 of its potential returns per unit of risk. CVS Health Corp is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 4,348 in CVS Health Corp on December 29, 2024 and sell it today you would earn a total of 2,393 from holding CVS Health Corp or generate 55.04% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 96.88% |
Values | Daily Returns |
Edita Food Industries vs. CVS Health Corp
Performance |
Timeline |
Edita Food Industries |
CVS Health Corp |
Edita Food and CVS Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Edita Food and CVS Health
The main advantage of trading using opposite Edita Food and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edita Food 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.Edita Food vs. Toyota Motor Corp | Edita Food vs. SoftBank Group Corp | Edita Food vs. Samsung Electronics Co | Edita Food vs. Samsung Electronics Co |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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