Correlation Between CVS Health and Toyota
Can any of the company-specific risk be diversified away by investing in both CVS Health and Toyota 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 Toyota 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 Toyota Motor Corp, you can compare the effects of market volatilities on CVS Health and Toyota 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 Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Toyota.
Diversification Opportunities for CVS Health and Toyota
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CVS and Toyota is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health Corp and Toyota Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor Corp 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 Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor Corp has no effect on the direction of CVS Health i.e., CVS Health and Toyota go up and down completely randomly.
Pair Corralation between CVS Health and Toyota
Assuming the 90 days trading horizon CVS Health Corp is expected to under-perform the Toyota. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health Corp is 1.12 times less risky than Toyota. The stock trades about -0.04 of its potential returns per unit of risk. The Toyota Motor Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 181,750 in Toyota Motor Corp on September 14, 2024 and sell it today you would earn a total of 90,100 from holding Toyota Motor Corp or generate 49.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.98% |
| Values | Daily Returns |
CVS Health Corp vs. Toyota Motor Corp
Performance |
| Timeline |
| CVS Health Corp |
| Toyota Motor Corp |
CVS Health and Toyota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Toyota
The main advantage of trading using opposite CVS Health and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Toyota 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 Toyota will offset losses from the drop in Toyota's long position.| CVS Health vs. Cars Inc | CVS Health vs. Zegona Communications Plc | CVS Health vs. Solstad Offshore ASA | CVS Health vs. Iron Mountain |
| Toyota vs. Eco Animal Health | Toyota vs. Cardinal Health | Toyota vs. Ecclesiastical Insurance Office | Toyota vs. CVS Health 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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