Correlation Between CVS Health and Fifth Third
Can any of the company-specific risk be diversified away by investing in both CVS Health and Fifth Third 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 Fifth Third into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVS Health and Fifth Third Bancorp, you can compare the effects of market volatilities on CVS Health and Fifth Third 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 Fifth Third. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVS Health and Fifth Third.
Diversification Opportunities for CVS Health and Fifth Third
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between CVS and Fifth is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding CVS Health and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp 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 Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of CVS Health i.e., CVS Health and Fifth Third go up and down completely randomly.
Pair Corralation between CVS Health and Fifth Third
Assuming the 90 days trading horizon CVS Health is expected to under-perform the Fifth Third. In addition to that, CVS Health is 1.29 times more volatile than Fifth Third Bancorp. It trades about -0.03 of its total potential returns per unit of risk. Fifth Third Bancorp is currently generating about 0.09 per unit of volatility. If you would invest 3,068 in Fifth Third Bancorp on September 12, 2024 and sell it today you would earn a total of 1,375 from holding Fifth Third Bancorp or generate 44.82% 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. Fifth Third Bancorp
Performance |
| Timeline |
| CVS Health |
| Fifth Third Bancorp |
CVS Health and Fifth Third Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVS Health and Fifth Third
The main advantage of trading using opposite CVS Health and Fifth Third positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVS Health position performs unexpectedly, Fifth Third 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 Fifth Third will offset losses from the drop in Fifth Third's long position.The idea behind CVS Health and Fifth Third Bancorp 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.| Fifth Third vs. Charter Communications | Fifth Third vs. Entravision Communications | Fifth Third vs. American Eagle Outfitters | Fifth Third vs. ELMOS SEMICONDUCTOR |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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