Correlation Between STELLA JONES and CVS Health

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Can any of the company-specific risk be diversified away by investing in both STELLA JONES 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 STELLA JONES and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STELLA JONES INC and CVS Health, you can compare the effects of market volatilities on STELLA JONES 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 STELLA JONES with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of STELLA JONES and CVS Health.

Diversification Opportunities for STELLA JONES and CVS Health

0.13
  Correlation Coefficient

Average diversification

The 3 months correlation between STELLA and CVS is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding STELLA JONES INC and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and STELLA JONES 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 STELLA JONES INC 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 has no effect on the direction of STELLA JONES i.e., STELLA JONES and CVS Health go up and down completely randomly.

Pair Corralation between STELLA JONES and CVS Health

Assuming the 90 days horizon STELLA JONES INC is expected to generate 1.23 times more return on investment than CVS Health. However, STELLA JONES is 1.23 times more volatile than CVS Health. It trades about 0.04 of its potential returns per unit of risk. CVS Health is currently generating about -0.04 per unit of risk. If you would invest  4,632  in STELLA JONES INC on September 13, 2024 and sell it today you would earn a total of  88.00  from holding STELLA JONES INC or generate 1.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

STELLA JONES INC  vs.  CVS Health

 Performance 
       Timeline  
STELLA JONES INC 

Risk-Adjusted Performance

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Over the last 90 days STELLA JONES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
CVS Health 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days CVS Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CVS Health is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

STELLA JONES and CVS Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with STELLA JONES and CVS Health

The main advantage of trading using opposite STELLA JONES and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STELLA JONES 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.
The idea behind STELLA JONES INC and CVS Health pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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