Correlation Between CVS Health and Inspiration Healthcare
Can any of the company-specific risk be diversified away by investing in both CVS Health and Inspiration Healthcare 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 Inspiration Healthcare 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 Inspiration Healthcare Group, you can compare the effects of market volatilities on CVS Health and Inspiration Healthcare 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 Inspiration Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Inspiration Healthcare.
Diversification Opportunities for CVS Health and Inspiration Healthcare
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between CVS and Inspiration is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Inspiration Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspiration Healthcare 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 Inspiration Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspiration Healthcare has no effect on the direction of CVS Health i.e., CVS Health and Inspiration Healthcare go up and down completely randomly.
Pair Corralation between CVS Health and Inspiration Healthcare
Assuming the 90 days trading horizon CVS Health Corp is expected to generate 2.31 times more return on investment than Inspiration Healthcare. However, CVS Health is 2.31 times more volatile than Inspiration Healthcare Group. It trades about 0.08 of its potential returns per unit of risk. Inspiration Healthcare Group is currently generating about -0.33 per unit of risk. If you would invest 5,650 in CVS Health Corp on September 1, 2024 and sell it today you would earn a total of 322.00 from holding CVS Health Corp or generate 5.7% 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. Inspiration Healthcare Group
Performance |
| Timeline |
| CVS Health Corp |
| Inspiration Healthcare |
CVS Health and Inspiration Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Inspiration Healthcare
The main advantage of trading using opposite CVS Health and Inspiration Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Inspiration Healthcare 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 Inspiration Healthcare will offset losses from the drop in Inspiration Healthcare's long position.| CVS Health vs. Verizon Communications | CVS Health vs. Gamma Communications PLC | CVS Health vs. Aeorema Communications Plc | CVS Health vs. PureTech Health plc |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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