Correlation Between Marvell Technology and CVS Health

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

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

Diversification Opportunities for Marvell Technology and CVS Health

-0.55

Correlation Coefficient

Marvell Technology  CVS Health

Excellent diversification

The 3 months correlation between Marvell and CVS is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Marvell Technology and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Marvell Technology 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 Marvell Technology 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 Marvell Technology i.e., Marvell Technology and CVS Health go up and down completely randomly.

Pair Corralation between Marvell Technology and CVS Health

Assuming the 90 days trading horizon Marvell Technology is expected to generate 1.47 times more return on investment than CVS Health. However, Marvell Technology is 1.47 times more volatile than CVS Health. It trades about 0.13 of its potential returns per unit of risk. CVS Health is currently generating about -0.04 per unit of risk. If you would invest  4,036  in Marvell Technology on September 30, 2024 and sell it today you would earn a total of  2,957  from holding Marvell Technology or generate 73.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.21%
Values	Daily Returns

Marvell Technology  vs.  CVS Health

Marvell Technology

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marvell Technology are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Marvell Technology sustained solid returns over the last few months and may actually be approaching a breakup point.

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. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Marvell Technology and CVS Health

The main advantage of trading using opposite Marvell Technology and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marvell Technology 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 Marvell Technology 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.