Correlation Between CVS Health and Coca-Cola Consolidated
Can any of the company-specific risk be diversified away by investing in both CVS Health and Coca-Cola Consolidated 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 Coca-Cola Consolidated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Coca Cola Consolidated, you can compare the effects of market volatilities on CVS Health and Coca-Cola Consolidated 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 Coca-Cola Consolidated. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Coca-Cola Consolidated.
Diversification Opportunities for CVS Health and Coca-Cola Consolidated
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CVS and Coca-Cola is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Coca Cola Consolidated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola Consolidated 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 Coca-Cola Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola Consolidated has no effect on the direction of CVS Health i.e., CVS Health and Coca-Cola Consolidated go up and down completely randomly.
Pair Corralation between CVS Health and Coca-Cola Consolidated
Assuming the 90 days trading horizon CVS Health is expected to generate 1.59 times less return on investment than Coca-Cola Consolidated. In addition to that, CVS Health is 1.48 times more volatile than Coca Cola Consolidated. It trades about 0.13 of its total potential returns per unit of risk. Coca Cola Consolidated is currently generating about 0.3 per unit of volatility. If you would invest 104,000 in Coca Cola Consolidated on September 2, 2024 and sell it today you would earn a total of 19,000 from holding Coca Cola Consolidated or generate 18.27% 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. Coca Cola Consolidated
Performance |
| Timeline |
| CVS Health |
| Coca Cola Consolidated |
CVS Health and Coca-Cola Consolidated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Coca-Cola Consolidated
The main advantage of trading using opposite CVS Health and Coca-Cola Consolidated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Coca-Cola Consolidated 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 Coca-Cola Consolidated will offset losses from the drop in Coca-Cola Consolidated's long position.| CVS Health vs. INTERSHOP Communications Aktiengesellschaft | CVS Health vs. Computershare Limited | CVS Health vs. Charter Communications | CVS Health vs. KRISPY KREME DL 01 |
| Coca-Cola Consolidated vs. DiamondRock Hospitality | Coca-Cola Consolidated vs. YOOMA WELLNESS INC | Coca-Cola Consolidated vs. CVS Health | Coca-Cola Consolidated vs. Astral Foods Limited |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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