Correlation Between Apple and CVS Group

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

Diversification Opportunities for Apple and CVS Group

-0.75
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Apple and CVS is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and CVS Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Group plc and Apple 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 Apple Inc are associated (or correlated) with CVS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Group plc has no effect on the direction of Apple i.e., Apple and CVS Group go up and down completely randomly.

Pair Corralation between Apple and CVS Group

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.28 times more return on investment than CVS Group. However, Apple Inc is 3.6 times less risky than CVS Group. It trades about 0.6 of its potential returns per unit of risk. CVS Group plc is currently generating about 0.07 per unit of risk. If you would invest  20,880  in Apple Inc on September 12, 2024 and sell it today you would earn a total of  2,835  from holding Apple Inc or generate 13.58% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

Apple Inc  vs.  CVS Group plc

 Performance 
       Timeline  
Apple Inc 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.
CVS Group plc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CVS Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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.

Apple and CVS Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apple and CVS Group

The main advantage of trading using opposite Apple and CVS Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, CVS Group 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 Group will offset losses from the drop in CVS Group's long position.
The idea behind Apple Inc and CVS Group plc 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.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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