Correlation Between CVS Health and InPlay Oil
Can any of the company-specific risk be diversified away by investing in both CVS Health and InPlay Oil 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 InPlay Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and InPlay Oil Corp, you can compare the effects of market volatilities on CVS Health and InPlay Oil 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 InPlay Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and InPlay Oil.
Diversification Opportunities for CVS Health and InPlay Oil
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CVS and InPlay is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and InPlay Oil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InPlay Oil Corp 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 InPlay Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InPlay Oil Corp has no effect on the direction of CVS Health i.e., CVS Health and InPlay Oil go up and down completely randomly.
Pair Corralation between CVS Health and InPlay Oil
Assuming the 90 days trading horizon CVS Health is expected to under-perform the InPlay Oil. In addition to that, CVS Health is 1.78 times more volatile than InPlay Oil Corp. It trades about -0.57 of its total potential returns per unit of risk. InPlay Oil Corp is currently generating about -0.45 per unit of volatility. If you would invest 116.00 in InPlay Oil Corp on September 28, 2024 and sell it today you would lose (14.00) from holding InPlay Oil Corp or give up 12.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. InPlay Oil Corp
Performance |
| Timeline |
| CVS Health |
| InPlay Oil Corp |
CVS Health and InPlay Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and InPlay Oil
The main advantage of trading using opposite CVS Health and InPlay Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, InPlay Oil 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 InPlay Oil will offset losses from the drop in InPlay Oil's long position.The idea behind CVS Health and InPlay Oil Corp 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.| InPlay Oil vs. HomeToGo SE | InPlay Oil vs. Tri Pointe Homes | InPlay Oil vs. KB HOME | InPlay Oil vs. Meli Hotels International |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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