Correlation Between CVS Health and KOOL2PLAY
Can any of the company-specific risk be diversified away by investing in both CVS Health and KOOL2PLAY 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 KOOL2PLAY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and KOOL2PLAY SA ZY, you can compare the effects of market volatilities on CVS Health and KOOL2PLAY 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 KOOL2PLAY. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and KOOL2PLAY.
Diversification Opportunities for CVS Health and KOOL2PLAY
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CVS and KOOL2PLAY is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and KOOL2PLAY SA ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KOOL2PLAY SA ZY 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 KOOL2PLAY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KOOL2PLAY SA ZY has no effect on the direction of CVS Health i.e., CVS Health and KOOL2PLAY go up and down completely randomly.
Pair Corralation between CVS Health and KOOL2PLAY
Assuming the 90 days trading horizon CVS Health is expected to under-perform the KOOL2PLAY. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health is 1.36 times less risky than KOOL2PLAY. The stock trades about -0.57 of its potential returns per unit of risk. The KOOL2PLAY SA ZY is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest 18.00 in KOOL2PLAY SA ZY on September 28, 2024 and sell it today you would lose (3.00) from holding KOOL2PLAY SA ZY or give up 16.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. KOOL2PLAY SA ZY
Performance |
| Timeline |
| CVS Health |
| KOOL2PLAY SA ZY |
CVS Health and KOOL2PLAY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and KOOL2PLAY
The main advantage of trading using opposite CVS Health and KOOL2PLAY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, KOOL2PLAY 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 KOOL2PLAY will offset losses from the drop in KOOL2PLAY's long position.The idea behind CVS Health and KOOL2PLAY SA ZY 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.| KOOL2PLAY vs. Nintendo Co | KOOL2PLAY vs. Sea Limited | KOOL2PLAY vs. Electronic Arts | KOOL2PLAY vs. NEXON Co |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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