Correlation Between Newtopia and CVS HEALTH

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

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

Diversification Opportunities for Newtopia and CVS HEALTH

0.6

Correlation Coefficient

Newtopia  CVS HEALTH

Poor diversification

The 3 months correlation between Newtopia and CVS is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Newtopia 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 Newtopia 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 Newtopia 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 Newtopia i.e., Newtopia and CVS HEALTH go up and down completely randomly.

Pair Corralation between Newtopia and CVS HEALTH

If you would invest  0.50  in Newtopia on October 6, 2024 and sell it today you would earn a total of  0.00  from holding Newtopia or generate 0.0% return on investment over 90 days.

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

Newtopia  vs.  CVS HEALTH CDR

Newtopia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newtopia 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 fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

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 Newtopia and CVS HEALTH

The main advantage of trading using opposite Newtopia and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newtopia 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 Newtopia 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.