Correlation Between CVS Health and Carnival PLC
Can any of the company-specific risk be diversified away by investing in both CVS Health and Carnival PLC 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 Carnival PLC 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 Carnival PLC, you can compare the effects of market volatilities on CVS Health and Carnival PLC 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 Carnival PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Carnival PLC.
Diversification Opportunities for CVS Health and Carnival PLC
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between CVS and Carnival is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Carnival PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carnival 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 Carnival PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carnival PLC has no effect on the direction of CVS Health i.e., CVS Health and Carnival PLC go up and down completely randomly.
Pair Corralation between CVS Health and Carnival PLC
Assuming the 90 days trading horizon CVS Health is expected to generate 2.5 times less return on investment than Carnival PLC. In addition to that, CVS Health is 1.97 times more volatile than Carnival PLC. It trades about 0.08 of its total potential returns per unit of risk. Carnival PLC is currently generating about 0.42 per unit of volatility. If you would invest 152,400 in Carnival PLC on August 31, 2024 and sell it today you would earn a total of 28,850 from holding Carnival PLC or generate 18.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health Corp vs. Carnival PLC
Performance |
| Timeline |
| CVS Health Corp |
| Carnival PLC |
CVS Health and Carnival PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Carnival PLC
The main advantage of trading using opposite CVS Health and Carnival PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Carnival PLC 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 Carnival PLC will offset losses from the drop in Carnival PLC's long position.| CVS Health vs. Neometals | CVS Health vs. Coor Service Management | CVS Health vs. Aeorema Communications Plc | CVS Health vs. JLEN Environmental Assets |
| Carnival PLC vs. PureTech Health plc | Carnival PLC vs. Coor Service Management | Carnival PLC vs. Schweiter Technologies AG | Carnival PLC vs. DXC Technology Co |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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