Correlation Between CVS Health and Indutrade
Can any of the company-specific risk be diversified away by investing in both CVS Health and Indutrade 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 CVS Health and Indutrade into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health Corp and Indutrade AB, you can compare the effects of market volatilities on CVS Health and Indutrade 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 CVS Health with a short position of Indutrade. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Indutrade.
Diversification Opportunities for CVS Health and Indutrade
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CVS and Indutrade is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Indutrade AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indutrade AB and CVS Health 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 CVS Health Corp are associated (or correlated) with Indutrade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indutrade AB has no effect on the direction of CVS Health i.e., CVS Health and Indutrade go up and down completely randomly.
Pair Corralation between CVS Health and Indutrade
Assuming the 90 days trading horizon CVS Health Corp is expected to generate 3.01 times more return on investment than Indutrade. However, CVS Health is 3.01 times more volatile than Indutrade AB. It trades about 0.12 of its potential returns per unit of risk. Indutrade AB is currently generating about -0.15 per unit of risk. If you would invest 5,517 in CVS Health Corp on September 3, 2024 and sell it today you would earn a total of 455.00 from holding CVS Health Corp or generate 8.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health Corp vs. Indutrade AB
Performance |
| Timeline |
| CVS Health Corp |
| Indutrade AB |
CVS Health and Indutrade Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Indutrade
The main advantage of trading using opposite CVS Health and Indutrade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Indutrade 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 Indutrade will offset losses from the drop in Indutrade's long position.| CVS Health vs. Tata Steel Limited | CVS Health vs. Jacquet Metal Service | CVS Health vs. Scandinavian Tobacco Group | CVS Health vs. Cornish Metals |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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