Correlation Between Grupo Financiero and CVS Health

Can any of the company-specific risk be diversified away by investing in both Grupo Financiero 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 Financiero 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 Financiero Banorte and CVS Health, you can compare the effects of market volatilities on Grupo Financiero 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 Financiero with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Financiero and CVS Health.

Diversification Opportunities for Grupo Financiero and CVS Health

0.37

Correlation Coefficient

Grupo Financiero  CVS Health

Weak diversification

The 3 months correlation between Grupo and CVS is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Financiero Banorte and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Grupo Financiero 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 Financiero Banorte 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 Financiero i.e., Grupo Financiero and CVS Health go up and down completely randomly.

Pair Corralation between Grupo Financiero and CVS Health

Assuming the 90 days trading horizon Grupo Financiero Banorte is expected to generate 0.8 times more return on investment than CVS Health. However, Grupo Financiero Banorte is 1.25 times less risky than CVS Health. It trades about 0.02 of its potential returns per unit of risk. CVS Health is currently generating about -0.03 per unit of risk. If you would invest  13,850  in Grupo Financiero Banorte on September 12, 2024 and sell it today you would earn a total of  142.00  from holding Grupo Financiero Banorte or generate 1.03% return on investment over 90 days.

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

Grupo Financiero Banorte  vs.  CVS Health

Grupo Financiero Banorte

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Grupo Financiero Banorte has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Grupo Financiero 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

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

Pair Trading with Grupo Financiero and CVS Health

The main advantage of trading using opposite Grupo Financiero and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Financiero 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 Financiero Banorte 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.