Correlation Between HEALTHCARE REAL and CVS Health

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

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

Diversification Opportunities for HEALTHCARE REAL and CVS Health

-0.11

Correlation Coefficient

HEALTHCARE REAL  CVS Health

Good diversification

The 3 months correlation between HEALTHCARE and CVS is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding HEALTHCARE REAL A and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and HEALTHCARE REAL 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 HEALTHCARE REAL A 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 HEALTHCARE REAL i.e., HEALTHCARE REAL and CVS Health go up and down completely randomly.

Pair Corralation between HEALTHCARE REAL and CVS Health

Assuming the 90 days horizon HEALTHCARE REAL is expected to generate 1.05 times less return on investment than CVS Health. But when comparing it to its historical volatility, HEALTHCARE REAL A is 1.87 times less risky than CVS Health. It trades about 0.12 of its potential returns per unit of risk. CVS Health is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,125  in CVS Health on August 31, 2024 and sell it today you would earn a total of  535.00  from holding CVS Health or generate 10.44% return on investment over 90 days.

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

HEALTHCARE REAL A  vs.  CVS Health

HEALTHCARE REAL A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HEALTHCARE REAL A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, HEALTHCARE REAL may actually be approaching a critical reversion point that can send shares even higher in December 2024.

CVS Health

Risk-Adjusted Performance

5 of 100

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 rather fragile basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with HEALTHCARE REAL and CVS Health

The main advantage of trading using opposite HEALTHCARE REAL and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HEALTHCARE REAL 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 HEALTHCARE REAL A 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 CEOs Directory module to screen CEOs from public companies around the world.