Correlation Between MAHLE Metal and CVS Health

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

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

Diversification Opportunities for MAHLE Metal and CVS Health

0.75

Correlation Coefficient

MAHLE Metal  CVS Health

Poor diversification

The 3 months correlation between MAHLE and CVS is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding MAHLE Metal Leve and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and MAHLE Metal 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 MAHLE Metal Leve 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 MAHLE Metal i.e., MAHLE Metal and CVS Health go up and down completely randomly.

Pair Corralation between MAHLE Metal and CVS Health

Assuming the 90 days trading horizon MAHLE Metal is expected to generate 10.2 times less return on investment than CVS Health. But when comparing it to its historical volatility, MAHLE Metal Leve is 1.84 times less risky than CVS Health. It trades about 0.04 of its potential returns per unit of risk. CVS Health is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,662  in CVS Health on December 30, 2024 and sell it today you would earn a total of  1,196  from holding CVS Health or generate 44.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

MAHLE Metal Leve  vs.  CVS Health

MAHLE Metal Leve

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MAHLE Metal Leve are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MAHLE Metal is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

CVS Health

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, CVS Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MAHLE Metal and CVS Health

The main advantage of trading using opposite MAHLE Metal and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAHLE Metal 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 MAHLE Metal Leve 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.