Correlation Between Senvest Capital and CVS HEALTH

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

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

Diversification Opportunities for Senvest Capital and CVS HEALTH

0.61

Correlation Coefficient

Senvest Capital  CVS HEALTH

Poor diversification

The 3 months correlation between Senvest and CVS is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Senvest Capital 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 Senvest Capital 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 Senvest Capital 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 Senvest Capital i.e., Senvest Capital and CVS HEALTH go up and down completely randomly.

Pair Corralation between Senvest Capital and CVS HEALTH

Assuming the 90 days trading horizon Senvest Capital is expected to generate 4.31 times less return on investment than CVS HEALTH. But when comparing it to its historical volatility, Senvest Capital is 2.09 times less risky than CVS HEALTH. It trades about 0.14 of its potential returns per unit of risk. CVS HEALTH CDR is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,086  in CVS HEALTH CDR on December 21, 2024 and sell it today you would earn a total of  610.00  from holding CVS HEALTH CDR or generate 56.17% return on investment over 90 days.

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

Senvest Capital  vs.  CVS HEALTH CDR

Senvest Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Senvest Capital are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Senvest Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CVS HEALTH CDR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CVS HEALTH CDR are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CVS HEALTH displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Senvest Capital and CVS HEALTH

The main advantage of trading using opposite Senvest Capital and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Senvest Capital 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 Senvest Capital 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.