Correlation Between Enhabit and CVS Health

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

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

Diversification Opportunities for Enhabit and CVS Health

-0.43

Correlation Coefficient

Enhabit  CVS Health

Very good diversification

The 3 months correlation between Enhabit and CVS is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Enhabit 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 Enhabit 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 Enhabit 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 Enhabit i.e., Enhabit and CVS Health go up and down completely randomly.

Pair Corralation between Enhabit and CVS Health

Given the investment horizon of 90 days Enhabit is expected to generate 0.93 times more return on investment than CVS Health. However, Enhabit is 1.08 times less risky than CVS Health. It trades about 0.06 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.18 per unit of risk. If you would invest  729.00  in Enhabit on October 8, 2024 and sell it today you would earn a total of  58.00  from holding Enhabit or generate 7.96% return on investment over 90 days.

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

Enhabit  vs.  CVS Health Corp

Enhabit

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enhabit are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Enhabit may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CVS Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Enhabit and CVS Health

The main advantage of trading using opposite Enhabit and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enhabit 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 Enhabit and CVS Health Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.