Correlation Between G2D Investments and CVS Health

Can any of the company-specific risk be diversified away by investing in both G2D Investments 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 G2D Investments and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G2D Investments and CVS Health, you can compare the effects of market volatilities on G2D Investments 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 G2D Investments with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of G2D Investments and CVS Health.

Diversification Opportunities for G2D Investments and CVS Health

-0.32

Correlation Coefficient

G2D Investments  CVS Health

Very good diversification

The 3 months correlation between G2D and CVS is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding G2D Investments and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and G2D Investments 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 G2D Investments 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 G2D Investments i.e., G2D Investments and CVS Health go up and down completely randomly.

Pair Corralation between G2D Investments and CVS Health

Assuming the 90 days trading horizon G2D Investments is expected to generate 1.1 times more return on investment than CVS Health. However, G2D Investments is 1.1 times more volatile than CVS Health. It trades about 0.01 of its potential returns per unit of risk. CVS Health is currently generating about -0.02 per unit of risk. If you would invest  210.00  in G2D Investments on September 17, 2024 and sell it today you would lose (10.00) from holding G2D Investments or give up 4.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.55%
Values	Daily Returns

G2D Investments  vs.  CVS Health

G2D Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G2D Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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. Despite somewhat strong basic indicators, CVS Health is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with G2D Investments and CVS Health

The main advantage of trading using opposite G2D Investments and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G2D Investments 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 G2D Investments 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 Transaction History module to view history of all your transactions and understand their impact on performance.