Correlation Between ASPEN TECHINC and CVS Health

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

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

Diversification Opportunities for ASPEN TECHINC and CVS Health

-0.43

Correlation Coefficient

ASPEN TECHINC  CVS Health

Very good diversification

The 3 months correlation between ASPEN and CVS is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding ASPEN TECHINC DL 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 ASPEN TECHINC 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 ASPEN TECHINC DL 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 ASPEN TECHINC i.e., ASPEN TECHINC and CVS Health go up and down completely randomly.

Pair Corralation between ASPEN TECHINC and CVS Health

Assuming the 90 days horizon ASPEN TECHINC is expected to generate 6.7 times less return on investment than CVS Health. But when comparing it to its historical volatility, ASPEN TECHINC DL is 3.8 times less risky than CVS Health. It trades about 0.25 of its potential returns per unit of risk. CVS Health Corp is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  4,280  in CVS Health Corp on October 25, 2024 and sell it today you would earn a total of  770.00  from holding CVS Health Corp or generate 17.99% return on investment over 90 days.

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

ASPEN TECHINC DL  vs.  CVS Health Corp

ASPEN TECHINC DL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ASPEN TECHINC DL are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ASPEN TECHINC reported solid returns over the last few months and may actually be approaching a breakup point.

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 nearly stable basic indicators, CVS Health is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ASPEN TECHINC and CVS Health

The main advantage of trading using opposite ASPEN TECHINC and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASPEN TECHINC 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 ASPEN TECHINC DL 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.