Correlation Between Sealed Air and CVS Health
Can any of the company-specific risk be diversified away by investing in both Sealed Air and CVS Health 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 Sealed Air and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sealed Air Corp and CVS Health Corp, you can compare the effects of market volatilities on Sealed Air and CVS Health 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 Sealed Air with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sealed Air and CVS Health.
Diversification Opportunities for Sealed Air and CVS Health
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Sealed and CVS is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sealed Air Corp and CVS Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health Corp and Sealed Air 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 Sealed Air Corp are associated (or correlated) with CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health Corp has no effect on the direction of Sealed Air i.e., Sealed Air and CVS Health go up and down completely randomly.
Pair Corralation between Sealed Air and CVS Health
Assuming the 90 days trading horizon Sealed Air Corp is expected to generate 1.1 times more return on investment than CVS Health. However, Sealed Air is 1.1 times more volatile than CVS Health Corp. It trades about -0.02 of its potential returns per unit of risk. CVS Health Corp is currently generating about -0.05 per unit of risk. If you would invest 4,866 in Sealed Air Corp on September 24, 2024 and sell it today you would lose (1,450) from holding Sealed Air Corp or give up 29.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 86.75% |
| Values | Daily Returns |
Sealed Air Corp vs. CVS Health Corp
Performance |
| Timeline |
| Sealed Air Corp |
| CVS Health Corp |
Sealed Air and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sealed Air and CVS Health
The main advantage of trading using opposite Sealed Air and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sealed Air position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| Sealed Air vs. Uniper SE | Sealed Air vs. Mulberry Group PLC | Sealed Air vs. London Security Plc | Sealed Air vs. Triad Group PLC |
| CVS Health vs. G5 Entertainment AB | CVS Health vs. Catalyst Media Group | CVS Health vs. Auction Technology Group | CVS Health vs. Pfeiffer Vacuum Technology |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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