Correlation Between CVS Health and Samsung Electronics
Can any of the company-specific risk be diversified away by investing in both CVS Health and Samsung Electronics 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 Samsung Electronics 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 Samsung Electronics Co, you can compare the effects of market volatilities on CVS Health and Samsung Electronics 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 Samsung Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Samsung Electronics.
Diversification Opportunities for CVS Health and Samsung Electronics
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CVS and Samsung is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Samsung Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Samsung Electronics 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 Samsung Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Samsung Electronics has no effect on the direction of CVS Health i.e., CVS Health and Samsung Electronics go up and down completely randomly.
Pair Corralation between CVS Health and Samsung Electronics
Assuming the 90 days trading horizon CVS Health Corp is expected to generate 1.58 times more return on investment than Samsung Electronics. However, CVS Health is 1.58 times more volatile than Samsung Electronics Co. It trades about 0.41 of its potential returns per unit of risk. Samsung Electronics Co is currently generating about -0.29 per unit of risk. If you would invest 4,563 in CVS Health Corp on November 7, 2024 and sell it today you would earn a total of 983.00 from holding CVS Health Corp or generate 21.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 91.3% |
| Values | Daily Returns |
CVS Health Corp vs. Samsung Electronics Co
Performance |
| Timeline |
| CVS Health Corp |
| Samsung Electronics |
CVS Health and Samsung Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Samsung Electronics
The main advantage of trading using opposite CVS Health and Samsung Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Samsung Electronics 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 Samsung Electronics will offset losses from the drop in Samsung Electronics' long position.| CVS Health vs. Empire Metals Limited | CVS Health vs. Endeavour Mining Corp | CVS Health vs. Vulcan Materials Co | CVS Health vs. Applied Materials |
| Samsung Electronics vs. Auto Trader Group | Samsung Electronics vs. Aptitude Software Group | Samsung Electronics vs. Universal Music Group | Samsung Electronics vs. Travel Leisure 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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