Correlation Between CVS Health and CLOVER HEALTH
Can any of the company-specific risk be diversified away by investing in both CVS Health and CLOVER 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 CVS Health and CLOVER HEALTH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and CLOVER HEALTH INV, you can compare the effects of market volatilities on CVS Health and CLOVER 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 CVS Health with a short position of CLOVER HEALTH. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and CLOVER HEALTH.
Diversification Opportunities for CVS Health and CLOVER HEALTH
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CVS and CLOVER is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and CLOVER HEALTH INV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLOVER HEALTH INV and CVS Health 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 CVS Health are associated (or correlated) with CLOVER HEALTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLOVER HEALTH INV has no effect on the direction of CVS Health i.e., CVS Health and CLOVER HEALTH go up and down completely randomly.
Pair Corralation between CVS Health and CLOVER HEALTH
Assuming the 90 days trading horizon CVS Health is expected to under-perform the CLOVER HEALTH. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health is 2.55 times less risky than CLOVER HEALTH. The stock trades about -0.02 of its potential returns per unit of risk. The CLOVER HEALTH INV is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 117.00 in CLOVER HEALTH INV on October 28, 2024 and sell it today you would earn a total of 318.00 from holding CLOVER HEALTH INV or generate 271.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. CLOVER HEALTH INV
Performance |
| Timeline |
| CVS Health |
| CLOVER HEALTH INV |
CVS Health and CLOVER HEALTH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and CLOVER HEALTH
The main advantage of trading using opposite CVS Health and CLOVER HEALTH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, CLOVER 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 CLOVER HEALTH will offset losses from the drop in CLOVER HEALTH's long position.The idea behind CVS Health and CLOVER HEALTH INV 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.| CLOVER HEALTH vs. UnitedHealth Group Incorporated | CLOVER HEALTH vs. UnitedHealth Group Incorporated | CLOVER HEALTH vs. Anthem Inc | CLOVER HEALTH vs. Cigna |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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