Correlation Between MTI Wireless and CVS Health

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

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

Diversification Opportunities for MTI Wireless and CVS Health

-0.03

Correlation Coefficient

MTI Wireless  CVS Health

Good diversification

The 3 months correlation between MTI and CVS is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding MTI Wireless Edge 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 MTI Wireless 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 MTI Wireless Edge 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 MTI Wireless i.e., MTI Wireless and CVS Health go up and down completely randomly.

Pair Corralation between MTI Wireless and CVS Health

Assuming the 90 days trading horizon MTI Wireless is expected to generate 1.01 times less return on investment than CVS Health. But when comparing it to its historical volatility, MTI Wireless Edge is 1.29 times less risky than CVS Health. It trades about 0.05 of its potential returns per unit of risk. CVS Health Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5,686  in CVS Health Corp on September 3, 2024 and sell it today you would earn a total of  286.00  from holding CVS Health Corp or generate 5.03% return on investment over 90 days.

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

MTI Wireless Edge  vs.  CVS Health Corp

MTI Wireless Edge

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MTI Wireless Edge are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, MTI Wireless may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CVS Health Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with MTI Wireless and CVS Health

The main advantage of trading using opposite MTI Wireless and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTI Wireless 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 MTI Wireless Edge 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.