Correlation Between GOLDMAN SACHS and CVS HEALTH

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

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

Diversification Opportunities for GOLDMAN SACHS and CVS HEALTH

-0.43

Correlation Coefficient

GOLDMAN SACHS  CVS HEALTH

Very good diversification

The 3 months correlation between GOLDMAN and CVS is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding GOLDMAN SACHS CDR and CVS HEALTH CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS HEALTH CDR and GOLDMAN SACHS 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 GOLDMAN SACHS CDR 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 CDR has no effect on the direction of GOLDMAN SACHS i.e., GOLDMAN SACHS and CVS HEALTH go up and down completely randomly.

Pair Corralation between GOLDMAN SACHS and CVS HEALTH

Assuming the 90 days trading horizon GOLDMAN SACHS CDR is expected to generate 0.42 times more return on investment than CVS HEALTH. However, GOLDMAN SACHS CDR is 2.39 times less risky than CVS HEALTH. It trades about 0.02 of its potential returns per unit of risk. CVS HEALTH CDR is currently generating about -0.35 per unit of risk. If you would invest  2,917  in GOLDMAN SACHS CDR on September 18, 2024 and sell it today you would earn a total of  8.00  from holding GOLDMAN SACHS CDR or generate 0.27% return on investment over 90 days.

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

GOLDMAN SACHS CDR  vs.  CVS HEALTH CDR

GOLDMAN SACHS CDR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GOLDMAN SACHS CDR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, GOLDMAN SACHS displayed solid returns over the last few months and may actually be approaching a breakup point.

CVS HEALTH CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS HEALTH CDR 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 very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with GOLDMAN SACHS and CVS HEALTH

The main advantage of trading using opposite GOLDMAN SACHS and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOLDMAN SACHS 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 GOLDMAN SACHS CDR and CVS HEALTH CDR 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.