Correlation Between Air Products and CVS Health
Can any of the company-specific risk be diversified away by investing in both Air Products 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 Air Products and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air Products and and CVS Health, you can compare the effects of market volatilities on Air Products 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 Air Products with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air Products and CVS Health.
Diversification Opportunities for Air Products and CVS Health
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Air and CVS is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Air Products 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 Air Products and 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 Air Products i.e., Air Products and CVS Health go up and down completely randomly.
Pair Corralation between Air Products and CVS Health
Assuming the 90 days trading horizon Air Products and is expected to under-perform the CVS Health. But the stock apears to be less risky and, when comparing its historical volatility, Air Products and is 2.63 times less risky than CVS Health. The stock trades about -0.16 of its potential returns per unit of risk. The CVS Health is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 3,506 in CVS Health on November 2, 2024 and sell it today you would lose (211.00) from holding CVS Health or give up 6.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.56% |
| Values | Daily Returns |
Air Products and vs. CVS Health
Performance |
| Timeline |
| Air Products |
| CVS Health |
Air Products and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air Products and CVS Health
The main advantage of trading using opposite Air Products and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products 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.| Air Products vs. HCA Healthcare, | Air Products vs. UnitedHealth Group Incorporated | Air Products vs. Academy Sports and | Air Products vs. Fair Isaac |
| CVS Health vs. LPL Financial Holdings | CVS Health vs. Verizon Communications | CVS Health vs. Tyson Foods | CVS Health vs. salesforce inc |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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