Correlation Between Companhia and CVS Health
Can any of the company-specific risk be diversified away by investing in both Companhia 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 Companhia and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia de Fiacao and CVS Health, you can compare the effects of market volatilities on Companhia 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 Companhia with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and CVS Health.
Diversification Opportunities for Companhia and CVS Health
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Companhia and CVS is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Fiacao and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Companhia 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 Companhia de Fiacao 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 Companhia i.e., Companhia and CVS Health go up and down completely randomly.
Pair Corralation between Companhia and CVS Health
Assuming the 90 days trading horizon Companhia de Fiacao is expected to generate 1.48 times more return on investment than CVS Health. However, Companhia is 1.48 times more volatile than CVS Health. It trades about 0.16 of its potential returns per unit of risk. CVS Health is currently generating about -0.05 per unit of risk. If you would invest 2,200 in Companhia de Fiacao on September 14, 2024 and sell it today you would earn a total of 299.00 from holding Companhia de Fiacao or generate 13.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia de Fiacao vs. CVS Health
Performance |
| Timeline |
| Companhia de Fiacao |
| CVS Health |
Companhia and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia and CVS Health
The main advantage of trading using opposite Companhia and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia 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.| Companhia vs. CVS Health | Companhia vs. Lloyds Banking Group | Companhia vs. Mitsubishi UFJ Financial | Companhia vs. Ameriprise Financial |
| CVS Health vs. Cognizant Technology Solutions | CVS Health vs. Monster Beverage | CVS Health vs. Raytheon Technologies | CVS Health vs. Bemobi Mobile Tech |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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