Correlation Between Vertex Resource and CVS HEALTH

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

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

Diversification Opportunities for Vertex Resource and CVS HEALTH

0.12

Correlation Coefficient

Vertex Resource  CVS HEALTH

Average diversification

The 3 months correlation between Vertex and CVS is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Vertex Resource Group 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 Vertex Resource 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 Vertex Resource 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 CDR has no effect on the direction of Vertex Resource i.e., Vertex Resource and CVS HEALTH go up and down completely randomly.

Pair Corralation between Vertex Resource and CVS HEALTH

Assuming the 90 days horizon Vertex Resource Group is expected to generate 1.13 times more return on investment than CVS HEALTH. However, Vertex Resource is 1.13 times more volatile than CVS HEALTH CDR. It trades about 0.21 of its potential returns per unit of risk. CVS HEALTH CDR is currently generating about -0.19 per unit of risk. If you would invest  25.00  in Vertex Resource Group on October 12, 2024 and sell it today you would earn a total of  3.00  from holding Vertex Resource Group or generate 12.0% return on investment over 90 days.

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

Vertex Resource Group  vs.  CVS HEALTH CDR

Vertex Resource Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vertex Resource Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Vertex Resource showed solid returns over the last few months and may actually be approaching a breakup point.

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 Vertex Resource and CVS HEALTH

The main advantage of trading using opposite Vertex Resource and CVS HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vertex Resource 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 Vertex Resource Group 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.