Correlation Between Spire Healthcare and CVS Health

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

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

Diversification Opportunities for Spire Healthcare and CVS Health

0.26

Correlation Coefficient

Spire Healthcare  CVS Health

Modest diversification

The 3 months correlation between Spire and CVS is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Spire Healthcare Group 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 Spire Healthcare 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 Spire Healthcare Group 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 Spire Healthcare i.e., Spire Healthcare and CVS Health go up and down completely randomly.

Pair Corralation between Spire Healthcare and CVS Health

Assuming the 90 days trading horizon Spire Healthcare Group is expected to generate 0.45 times more return on investment than CVS Health. However, Spire Healthcare Group is 2.23 times less risky than CVS Health. It trades about -0.04 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.06 per unit of risk. If you would invest  23,550  in Spire Healthcare Group on September 14, 2024 and sell it today you would lose (950.00) from holding Spire Healthcare Group or give up 4.03% of portfolio value over 90 days.

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

Spire Healthcare Group  vs.  CVS Health Corp

Spire Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spire Healthcare Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Spire Healthcare is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

CVS Health Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVS Health Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Spire Healthcare and CVS Health

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

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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 Transaction History module to view history of all your transactions and understand their impact on performance.