Correlation Between Plano Plano and CVS Health

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

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

Diversification Opportunities for Plano Plano and CVS Health

0.87

Correlation Coefficient

Plano Plano  CVS Health

Very poor diversification

The 3 months correlation between Plano and CVS is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Plano Plano Desenvolvimento and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Plano Plano 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 Plano Plano Desenvolvimento 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 Plano Plano i.e., Plano Plano and CVS Health go up and down completely randomly.

Pair Corralation between Plano Plano and CVS Health

Assuming the 90 days trading horizon Plano Plano is expected to generate 1.13 times less return on investment than CVS Health. In addition to that, Plano Plano is 1.18 times more volatile than CVS Health. It trades about 0.17 of its total potential returns per unit of risk. CVS Health is currently generating about 0.23 per unit of volatility. If you would invest  2,688  in CVS Health on December 22, 2024 and sell it today you would earn a total of  1,189  from holding CVS Health or generate 44.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.31%
Values	Daily Returns

Plano Plano Desenvolvimento  vs.  CVS Health

Plano Plano Desenvol

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Plano Plano Desenvolvimento are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Plano Plano unveiled solid returns over the last few months and may actually be approaching a breakup point.

CVS Health

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health are ranked lower than 18 (%) 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 Plano Plano and CVS Health

The main advantage of trading using opposite Plano Plano and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plano Plano 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 Plano Plano Desenvolvimento 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.