Correlation Between CVS Health and ONEOK
Can any of the company-specific risk be diversified away by investing in both CVS Health and ONEOK 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 ONEOK 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 ONEOK Inc, you can compare the effects of market volatilities on CVS Health and ONEOK 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 ONEOK. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and ONEOK.
Diversification Opportunities for CVS Health and ONEOK
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CVS and ONEOK is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc 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 ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of CVS Health i.e., CVS Health and ONEOK go up and down completely randomly.
Pair Corralation between CVS Health and ONEOK
Assuming the 90 days trading horizon CVS Health Corp is expected to generate 1.52 times more return on investment than ONEOK. However, CVS Health is 1.52 times more volatile than ONEOK Inc. It trades about 0.39 of its potential returns per unit of risk. ONEOK Inc is currently generating about 0.11 per unit of risk. If you would invest 4,503 in CVS Health Corp on October 26, 2024 and sell it today you would earn a total of 859.00 from holding CVS Health Corp or generate 19.08% 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. ONEOK Inc
Performance |
| Timeline |
| CVS Health Corp |
| ONEOK Inc |
CVS Health and ONEOK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and ONEOK
The main advantage of trading using opposite CVS Health and ONEOK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, ONEOK 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 ONEOK will offset losses from the drop in ONEOK's long position.| CVS Health vs. Oxford Technology 2 | CVS Health vs. Tatton Asset Management | CVS Health vs. Sunny Optical Technology | CVS Health vs. Summit Materials Cl |
| ONEOK vs. CVS Health Corp | ONEOK vs. Inspiration Healthcare Group | ONEOK vs. Teradata Corp | ONEOK vs. Rosslyn Data Technologies |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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