Correlation Between Grupo Hotelero and CVS Health

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

Diversification Opportunities for Grupo Hotelero and CVS Health

0.13

Correlation Coefficient

Grupo Hotelero  CVS Health

Average diversification

The 3 months correlation between Grupo and CVS is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Hotelero Santa and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Grupo Hotelero 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 Hotelero Santa 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 Hotelero i.e., Grupo Hotelero and CVS Health go up and down completely randomly.

Pair Corralation between Grupo Hotelero and CVS Health

Assuming the 90 days trading horizon Grupo Hotelero is expected to generate 172.84 times less return on investment than CVS Health. But when comparing it to its historical volatility, Grupo Hotelero Santa is 1.08 times less risky than CVS Health. It trades about 0.0 of its potential returns per unit of risk. CVS Health is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  88,695  in CVS Health on October 23, 2024 and sell it today you would earn a total of  19,806  from holding CVS Health or generate 22.33% return on investment over 90 days.

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

Grupo Hotelero Santa  vs.  CVS Health

Grupo Hotelero Santa

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Hotelero Santa are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Grupo Hotelero may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 Hotelero and CVS Health

The main advantage of trading using opposite Grupo Hotelero and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Hotelero 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 Hotelero Santa 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.