Correlation Between FEMALE HEALTH and CVS Health

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

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

Diversification Opportunities for FEMALE HEALTH and CVS Health

0.15

Correlation Coefficient

FEMALE HEALTH  CVS Health

Average diversification

The 3 months correlation between FEMALE and CVS is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding FEMALE HEALTH and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and FEMALE HEALTH 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 FEMALE HEALTH 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 FEMALE HEALTH i.e., FEMALE HEALTH and CVS Health go up and down completely randomly.

Pair Corralation between FEMALE HEALTH and CVS Health

Assuming the 90 days trading horizon FEMALE HEALTH is expected to under-perform the CVS Health. In addition to that, FEMALE HEALTH is 1.49 times more volatile than CVS Health. It trades about -0.01 of its total potential returns per unit of risk. CVS Health is currently generating about 0.07 per unit of volatility. If you would invest  5,149  in CVS Health on September 3, 2024 and sell it today you would earn a total of  506.00  from holding CVS Health or generate 9.83% return on investment over 90 days.

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

FEMALE HEALTH  vs.  CVS Health

FEMALE HEALTH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FEMALE HEALTH has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FEMALE HEALTH is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

CVS Health

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with FEMALE HEALTH and CVS Health

The main advantage of trading using opposite FEMALE HEALTH and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FEMALE HEALTH 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 FEMALE HEALTH 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.