Correlation Between CVS Health and Metro Bank
Can any of the company-specific risk be diversified away by investing in both CVS Health and Metro Bank 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 Metro Bank 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 Metro Bank PLC, you can compare the effects of market volatilities on CVS Health and Metro Bank 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 Metro Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Metro Bank.
Diversification Opportunities for CVS Health and Metro Bank
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CVS and Metro is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Metro Bank PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metro Bank 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 Metro Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metro Bank PLC has no effect on the direction of CVS Health i.e., CVS Health and Metro Bank go up and down completely randomly.
Pair Corralation between CVS Health and Metro Bank
Assuming the 90 days trading horizon CVS Health Corp is expected to under-perform the Metro Bank. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health Corp is 1.7 times less risky than Metro Bank. The stock trades about -0.04 of its potential returns per unit of risk. The Metro Bank PLC is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 12,640 in Metro Bank PLC on October 11, 2024 and sell it today you would lose (3,290) from holding Metro Bank PLC or give up 26.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
CVS Health Corp vs. Metro Bank PLC
Performance |
| Timeline |
| CVS Health Corp |
| Metro Bank PLC |
CVS Health and Metro Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Metro Bank
The main advantage of trading using opposite CVS Health and Metro Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Metro Bank 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 Metro Bank will offset losses from the drop in Metro Bank's long position.| CVS Health vs. Lundin Mining Corp | CVS Health vs. First Class Metals | CVS Health vs. Blackrock World Mining | CVS Health vs. Bisichi Mining PLC |
| Metro Bank vs. JD Sports Fashion | Metro Bank vs. Molson Coors Beverage | Metro Bank vs. Verizon Communications | Metro Bank vs. Universal Display 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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