Correlation Between CVS Health and Datang International
Can any of the company-specific risk be diversified away by investing in both CVS Health and Datang International 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 Datang International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Datang International Power, you can compare the effects of market volatilities on CVS Health and Datang International 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 Datang International. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Datang International.
Diversification Opportunities for CVS Health and Datang International
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CVS and Datang is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Datang International Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Datang International 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 Datang International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Datang International has no effect on the direction of CVS Health i.e., CVS Health and Datang International go up and down completely randomly.
Pair Corralation between CVS Health and Datang International
Assuming the 90 days trading horizon CVS Health is expected to under-perform the Datang International. But the stock apears to be less risky and, when comparing its historical volatility, CVS Health is 1.09 times less risky than Datang International. The stock trades about -0.18 of its potential returns per unit of risk. The Datang International Power is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 17.00 in Datang International Power on September 15, 2024 and sell it today you would earn a total of 0.00 from holding Datang International Power or generate 0.0% 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. Datang International Power
Performance |
| Timeline |
| CVS Health |
| Datang International |
CVS Health and Datang International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Datang International
The main advantage of trading using opposite CVS Health and Datang International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Datang International 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 Datang International will offset losses from the drop in Datang International's long position.The idea behind CVS Health and Datang International Power 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.| Datang International vs. CN YANGTPWR GDR | Datang International vs. SIEMENS ENERGY AG | Datang International vs. Siemens Energy AG | Datang International vs. Vistra Corp |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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