Correlation Between CVS Health and Universal Music
Can any of the company-specific risk be diversified away by investing in both CVS Health and Universal Music 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 Universal Music 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 Universal Music Group, you can compare the effects of market volatilities on CVS Health and Universal Music 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 Universal Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Universal Music.
Diversification Opportunities for CVS Health and Universal Music
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CVS and Universal is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group 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 Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of CVS Health i.e., CVS Health and Universal Music go up and down completely randomly.
Pair Corralation between CVS Health and Universal Music
Assuming the 90 days trading horizon CVS Health Corp is expected to generate 3.02 times more return on investment than Universal Music. However, CVS Health is 3.02 times more volatile than Universal Music Group. It trades about 0.07 of its potential returns per unit of risk. Universal Music Group is currently generating about -0.2 per unit of risk. If you would invest 5,737 in CVS Health Corp on August 28, 2024 and sell it today you would earn a total of 264.00 from holding CVS Health Corp or generate 4.6% 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. Universal Music Group
Performance |
| Timeline |
| CVS Health Corp |
| Universal Music Group |
CVS Health and Universal Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Universal Music
The main advantage of trading using opposite CVS Health and Universal Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Universal Music 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 Universal Music will offset losses from the drop in Universal Music's long position.| CVS Health vs. Samsung Electronics Co | CVS Health vs. Samsung Electronics Co | CVS Health vs. Hyundai Motor | CVS Health vs. Toyota Motor Corp |
| Universal Music vs. Samsung Electronics Co | Universal Music vs. Samsung Electronics Co | Universal Music vs. Hyundai Motor | Universal Music vs. Toyota Motor Corp |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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