Correlation Between Zegona Communications and CVS Health

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

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

Diversification Opportunities for Zegona Communications and CVS Health

0.52

Correlation Coefficient

Zegona Communications  CVS Health

Very weak diversification

The 3 months correlation between Zegona and CVS is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc 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 Zegona Communications 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 Zegona Communications Plc 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 Zegona Communications i.e., Zegona Communications and CVS Health go up and down completely randomly.

Pair Corralation between Zegona Communications and CVS Health

Assuming the 90 days trading horizon Zegona Communications Plc is expected to generate 1.08 times more return on investment than CVS Health. However, Zegona Communications is 1.08 times more volatile than CVS Health Corp. It trades about 0.25 of its potential returns per unit of risk. CVS Health Corp is currently generating about 0.05 per unit of risk. If you would invest  34,800  in Zegona Communications Plc on November 29, 2024 and sell it today you would earn a total of  22,700  from holding Zegona Communications Plc or generate 65.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

Zegona Communications Plc  vs.  CVS Health Corp

Zegona Communications Plc

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zegona Communications Plc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Zegona Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

CVS Health Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVS Health Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, CVS Health may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Zegona Communications and CVS Health

The main advantage of trading using opposite Zegona Communications and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zegona Communications 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 Zegona Communications Plc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.