Correlation Between Seven West and CVS Health

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

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

Diversification Opportunities for Seven West and CVS Health

0.44

Correlation Coefficient

Seven West  CVS Health

Very weak diversification

The 3 months correlation between Seven and CVS is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Seven West Media 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 Seven West 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 Seven West Media 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 Seven West i.e., Seven West and CVS Health go up and down completely randomly.

Pair Corralation between Seven West and CVS Health

Assuming the 90 days horizon Seven West Media is expected to under-perform the CVS Health. In addition to that, Seven West is 2.03 times more volatile than CVS Health Corp. It trades about -0.03 of its total potential returns per unit of risk. CVS Health Corp is currently generating about -0.04 per unit of volatility. If you would invest  7,720  in CVS Health Corp on October 7, 2024 and sell it today you would lose (3,260) from holding CVS Health Corp or give up 42.23% of portfolio value over 90 days.

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

Seven West Media  vs.  CVS Health Corp

Seven West Media

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seven West Media has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Seven West and CVS Health

The main advantage of trading using opposite Seven West and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Seven West 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 Seven West Media 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.