Correlation Between Grupo Carso and CVS Health

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

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

Diversification Opportunities for Grupo Carso and CVS Health

0.74

Correlation Coefficient

Grupo Carso  CVS Health

Poor diversification

The 3 months correlation between Grupo and CVS is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Carso SAB and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Grupo Carso 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 Grupo Carso SAB 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 Grupo Carso i.e., Grupo Carso and CVS Health go up and down completely randomly.

Pair Corralation between Grupo Carso and CVS Health

Assuming the 90 days trading horizon Grupo Carso SAB is expected to under-perform the CVS Health. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Carso SAB is 1.95 times less risky than CVS Health. The stock trades about -0.05 of its potential returns per unit of risk. The CVS Health is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  119,984  in CVS Health on December 3, 2024 and sell it today you would earn a total of  13,696  from holding CVS Health or generate 11.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Grupo Carso SAB  vs.  CVS Health

Grupo Carso SAB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grupo Carso SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Grupo Carso is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CVS Health

Risk-Adjusted Performance

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 fairly weak basic indicators, CVS Health showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Carso and CVS Health

The main advantage of trading using opposite Grupo Carso and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Carso 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 Grupo Carso SAB 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .