Correlation Between CVS Health and Avon Protection
Can any of the company-specific risk be diversified away by investing in both CVS Health and Avon Protection 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 Avon Protection 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 Avon Protection PLC, you can compare the effects of market volatilities on CVS Health and Avon Protection 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 Avon Protection. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Avon Protection.
Diversification Opportunities for CVS Health and Avon Protection
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CVS and Avon is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Avon Protection PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avon Protection PLC 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 Avon Protection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avon Protection PLC has no effect on the direction of CVS Health i.e., CVS Health and Avon Protection go up and down completely randomly.
Pair Corralation between CVS Health and Avon Protection
Assuming the 90 days trading horizon CVS Health Corp is expected to generate 1.94 times more return on investment than Avon Protection. However, CVS Health is 1.94 times more volatile than Avon Protection PLC. It trades about 0.37 of its potential returns per unit of risk. Avon Protection PLC is currently generating about 0.39 per unit of risk. If you would invest 4,421 in CVS Health Corp on October 20, 2024 and sell it today you would earn a total of 792.00 from holding CVS Health Corp or generate 17.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
CVS Health Corp vs. Avon Protection PLC
Performance |
| Timeline |
| CVS Health Corp |
| Avon Protection PLC |
CVS Health and Avon Protection Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Avon Protection
The main advantage of trading using opposite CVS Health and Avon Protection positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Avon Protection 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 Avon Protection will offset losses from the drop in Avon Protection's long position.| CVS Health vs. Fidelity National Information | CVS Health vs. Roebuck Food Group | CVS Health vs. Ebro Foods | CVS Health vs. Hilton Food Group |
| Avon Protection vs. Catalyst Media Group | Avon Protection vs. Tamburi Investment Partners | Avon Protection vs. Magnora ASA | Avon Protection vs. Oncimmune Holdings plc |
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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