Correlation Between Lindsell Train and CVS Health

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

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

Diversification Opportunities for Lindsell Train and CVS Health

-0.59

Correlation Coefficient

Lindsell Train  CVS Health

Excellent diversification

The 3 months correlation between Lindsell and CVS is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Lindsell Train Investment and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp and Lindsell Train 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 Lindsell Train Investment 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 Corp has no effect on the direction of Lindsell Train i.e., Lindsell Train and CVS Health go up and down completely randomly.

Pair Corralation between Lindsell Train and CVS Health

Assuming the 90 days trading horizon Lindsell Train Investment is expected to generate 0.87 times more return on investment than CVS Health. However, Lindsell Train Investment is 1.15 times less risky than CVS Health. It trades about 0.28 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.62 per unit of risk. If you would invest  72,200  in Lindsell Train Investment on October 4, 2024 and sell it today you would earn a total of  7,800  from holding Lindsell Train Investment or generate 10.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Lindsell Train Investment  vs.  CVS Health Corp

Lindsell Train Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lindsell Train Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Lindsell Train is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

CVS Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lindsell Train and CVS Health

The main advantage of trading using opposite Lindsell Train and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lindsell Train 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 Lindsell Train Investment and CVS Health Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.