Correlation Between Income Financial and CVS HEALTH

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

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

Diversification Opportunities for Income Financial and CVS HEALTH

-0.34

Correlation Coefficient

Income Financial  CVS HEALTH

Very good diversification

The 3 months correlation between Income and CVS is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Income Financial Trust 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 Income Financial 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 Income Financial Trust 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 Income Financial i.e., Income Financial and CVS HEALTH go up and down completely randomly.

Pair Corralation between Income Financial and CVS HEALTH

Assuming the 90 days trading horizon Income Financial Trust is expected to generate 1.05 times more return on investment than CVS HEALTH. However, Income Financial is 1.05 times more volatile than CVS HEALTH CDR. It trades about 0.0 of its potential returns per unit of risk. CVS HEALTH CDR is currently generating about -0.05 per unit of risk. If you would invest  972.00  in Income Financial Trust on October 10, 2024 and sell it today you would lose (107.00) from holding Income Financial Trust or give up 11.01% of portfolio value over 90 days.

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

Income Financial Trust  vs.  CVS HEALTH CDR

Income Financial Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Income Financial Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Income Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Income Financial and CVS HEALTH

The main advantage of trading using opposite Income Financial and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Financial 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 Income Financial Trust 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.