Correlation Between CVS Health and Vicinity Centres
Can any of the company-specific risk be diversified away by investing in both CVS Health and Vicinity Centres 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 Vicinity Centres into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Vicinity Centres, you can compare the effects of market volatilities on CVS Health and Vicinity Centres 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 Vicinity Centres. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Vicinity Centres.
Diversification Opportunities for CVS Health and Vicinity Centres
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between CVS and Vicinity is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Vicinity Centres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vicinity Centres 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 Vicinity Centres. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vicinity Centres has no effect on the direction of CVS Health i.e., CVS Health and Vicinity Centres go up and down completely randomly.
Pair Corralation between CVS Health and Vicinity Centres
Assuming the 90 days trading horizon CVS Health is expected to under-perform the Vicinity Centres. In addition to that, CVS Health is 1.55 times more volatile than Vicinity Centres. It trades about -0.01 of its total potential returns per unit of risk. Vicinity Centres is currently generating about 0.06 per unit of volatility. If you would invest 104.00 in Vicinity Centres on September 4, 2024 and sell it today you would earn a total of 24.00 from holding Vicinity Centres or generate 23.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVS Health vs. Vicinity Centres
Performance |
| Timeline |
| CVS Health |
| Vicinity Centres |
CVS Health and Vicinity Centres Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Vicinity Centres
The main advantage of trading using opposite CVS Health and Vicinity Centres positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Vicinity Centres 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 Vicinity Centres will offset losses from the drop in Vicinity Centres' long position.| CVS Health vs. TOTAL GABON | CVS Health vs. Walgreens Boots Alliance | CVS Health vs. Peak Resources Limited |
| Vicinity Centres vs. AIR PRODCHEMICALS | Vicinity Centres vs. Titan Machinery | Vicinity Centres vs. North American Construction | Vicinity Centres vs. Shin Etsu Chemical 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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